History's Replication Crisis

 

Anton Howes recently asked Does History Have a Replication Crisis?  The question is one that Howes has been concerned with for some time, but the immediate impetus for the essay was the publication of Jenny Bulstrode’s Black metallurgists and the making of the industrial revolution published in the journal History & Technology. Bulstrode claims that,

“Between 1783 and 1784, British financier turned ironmaster, Henry Cort, patented a process of rendering scrap metal into valuable bar iron that has been celebrated as one of the most important innovations in the making of the modern world. Here, the concern is the 76 Black metallurgists in Jamaica, who developed the process for which Cort took credit.”

Howes describes the innovation as a process “to more easily convert scrap iron into new bar or wrought iron — a higher-quality iron that had had various impurities beaten out of it with hammers — by bundling the scrap together, heating it, and then passing it through grooved rollers, rather than the more usual flat ones, stretching and smoothing the sides and edges of the heated metal so that the resulting bars became “perfectly welded at the edges and throughout” and “completely welded at the sides, without a crack, into one mass, perfectly sound to the centre”.” Not surprisingly, the discovery that a famous inventor of an important process had in fact stolen his invention from enslaved people spread quickly.

On NPR you can listen to How Henry Cort stole his iron innovation from Black metallurgists in Jamaica

In the Guardian you can read about how Industrial Revolution iron method ‘was taken from Jamaica by Briton’

At The World you can hear how Historian uncovers the Jamaican metal workers behind Industrial Revolution

At New Scientist you can read about how English industrialist stole iron technique from Black metallurgists

     Howes, however, was skeptical of the claim ( The Cort Case) suggesting that the evidence presented in the paper did not warrant the conclusion that the innovation in question had been developed by enslaved workers and then stolen by Cort. Oliver Jelf (The origin of Henry Cort’s iron-rolling process: assessing the evidence) looked at the sources cited by Bulstrode and concluded that there was a more fundamental problem. The sources simply did not say what Bulstrode claimed they did. For instance,

 

Jelf did not simply claim that the sources do not support Bulstrode’s argument, he transcribed and presented the sources in the paper, leading Howes to state that “What I simply cannot fathom, now that I’ve read her sources thanks to Jelf’s transcriptions, is how Bulstrode arrived at her narrative at all (Does History Have a Replication Crisis?).”

Ian Leslie (Stories are bad for your intelligence: How Historians (and Others) Make Themselves Stupid) has theory for how Bulstrode came to the narrative. He traces it to problems with stories and  story telling. Leslie says that,

I doubt that Bulstrode set out to deceive. My guess is that she came across a few suggestive fragments in her reading (the ‘cousin’ of Cort travelling from Jamaica to England) and wanted so badly to make them into a story which fitted her ideologically determined prior - that the British stole ideas from those they enslaved - that she got carried away, fabricating causes and effects where none existed.”

He thinks more of the blame should fall on the peer reviewers. Leslie suggests that,

It’s one thing for a young and passionate academic to make mistakes; it’s quite another for a series of experienced academics to let her make them. The paper had two anonymous peer-reviewers (Bulstrode thanks other historians in an endnote, though they may not have read the paper). Even to an ignorant reader like me, the paper just smells funny - it has the aroma of the fantastical. How on earth did these experts read it without becoming suspicious? Why didn’t they double-check its remarkable claims?

I can’t agree with Leslie’s argument. I don’t think that stories or peer-reviewers are the fundamental problem here. 

We need to tell stories. Often the answer to “Why did this happen?” is a sequence of events, a story about how it came to happen. Nor can the blame for misleadingly citing sources be pushed on to the referees. Although I am an economist, I have probably written more referee reports for books and papers written by historians than economists. I will note it in my report if I think an author incorrectly uses a source that I am familiar with.  But I can’t check every citation. I can’t even check the citations to crucial claims if it requires a trip to the archive. Experts in the field should be familiar with important secondary sources, but you can’t know every primary source. You certainly can’t run off to check on every novel primary sources that someone has discovered. You have to be able to trust the author to honestly report what is in the sources that that they cite.

Leslie’s concern about the siren song of stories makes him overly generous with Bulstrode. A professional historian should not get carried away with enthusiasm to the point that they try to support claims with references to sources that do not actually provide any support for those claims. Actually, amateur historians and undergraduate students shouldn't do that either. Historians must tell stories, but they must tell stories that are constrained by the sources. If you do not want your story telling to be constrained by the historical evidence you should be forthcoming and admit that your genre is historical fiction, not history.

I have frequently said that I think honesty is the most important trait for a historian. In economics and other quantitative social sciences I can say “Send me your data.” Many journals require making the data available. But a historian might cite documents that I would have to travel to multiple cities, states, or even countries to access. To be of any use to me I need to be able to trust that you have honestly represented the sources that you cite. Once you have lost my trust you are worthless to me as a historian. Even if I can point to things that you got right, I can’t be sure about anything that I don’t already know. I can’t learn anything from you.

Anton Howes suggests making history more like quantitative social sciences. Try to make copies of relevant sources available. Now that so many people have digital images of the primary sources they use this is at least imaginable. Still, it is not a panacea, as demonstrated by recent revelations on honesty research (see datacolada.org.) Nevertheless, to the extent that it can be done, it would be great, both for the credibility of current research as well as a resource for future research.

But there should also be repercussions. Sadly, I doubt that there will be. Anton Howes notes other historical myths that seem immune to revision in response to evidence. I and others have written a great deal about one historian who in an influential book did not honestly represent what was in primary or secondary sources, going well beyond honest mistakes driven by youthful enthusiasm. As best I can tell there were absolutely no repercussions for him. Other historians still cite the book and praise the author. 

I hope that I am wrong; I hope that many historians read Howes' Does History Have a Replication Crisis? and take the question seriously.

Recent NBER Meetings

 

Yes, NBER charges for downloads of working papers, but you can watch some recent meetings for free. By the way, it has also been my experience that you can usually find ungated versions of most NBER working papers if you look around.

 

I think both the Race and Stratification Economics and the Development of the American Economy meetings should be of interest to readers of this blog.

 

The final presentation at the Race and Stratification meeting is University of Mary Washington economics alum Lavar Edmonds, who is currently working on a Ph.D. in economics at Stanford, presenting his research on the impact of HBCU trained teachers.

 

I also liked that the Race and Stratification meeting about how one could incorporate race and stratification economics into introductory economics courses.

 

NBER Race and Stratification Working Group on YouTube

 

https://www.nber.org/conferences/race-and-stratification-working-group-spring-2023

 

Caste-based and Racial Wealth Inequality in India and the United States

Ishan Anand, Indian Institute of Technology Delhi

 

Discussants:

Ellora Derenoncourt, Princeton University and NBER

Ashwini Deshpande, Ashoka University

 

Perceptions of Racial Gaps, their Causes, and Ways to Reduce Them

Matteo F. Ferroni, Boston University

Stefanie Stantcheva, Harvard University and NBER

 

Discussants:

Michael Kraus, Yale University

Candis Watts Smith, Duke University

 

Unequal Gradients: Sex, Skin Tone, and Intergenerational Economic Mobility

Luis A. Monroy-Gómez-Franco, University of Massachusetts, Amherst

Roberto Vélez-Grajales, Centro de Estudios Espinosa Yglesias

Gastón Yalonetzky, Leeds University

 

Discussants:

Art Goldsmith, Washington and Lee University

Chantal Smith, Washington and Lee University

 

Teaching Discrimination in Introductory Economics: An Approach Incorporating Stratification Economics

Jorgen M. Harris, Occidental College

Mary Lopez, Occidental College

 

Complementary Investments Over the Life Course and the Black-White Earnings Gap

Sonia R. Bhalotra, University of Warwick

Damian Clarke, Universidad de Chile

Atheendar Venkataramani, University of Pennsylvania and NBER

 

Estimating Disenfranchisement in U.S. Elections, 1870-1970

Jeffery A. Jenkins, University of Southern California

Thomas R. Gray, University of Texas at Dallas

 

The Determinants and Impacts of Historical Treaty-Making in Canada

Donn. L. Feir, University of Victoria

Rob Gillezeau, University of Toronto

Maggie E.C. Jones, Emory University and NBER

 

A Simple Model of Group Conflict, Inequality and Stratification

Daniele Tavani, Colorado State University

Brendan Brundage, Colorado State University

 

Discussants:

Pablo Beramendi, Duke University

Patrick L. Mason, University of Massachusetts Amherst

 

Racial Disparities in the Tax Treatment of Marriage

Janet Holtzblatt, Tax Policy Center

Swati Joshi, Brookings Institution

Nora R. Cahill, Brookings Institution

William Gale, Brookings Institution

 

Not so Black and White: Uncovering Racial Bias from Systematically Misreported Trooper Reports

Elizabeth Luh, University of Michigan

 

Economic Inequality and Stratification after a Natural Disaster

Anita Alves Pena, Colorado State University

 

Role Models Revisited: HBCUs, Same-Race Teacher Effects, and Black Student Achievement

Lavar C. Edmonds, Stanford University

Discussant:

Michael Gottfried, University of Pennsylvania

Karolyn Tyson, Georgetown University

 

 

NBER Development of the American Economy Program meeting on YouTube

 

https://www.nber.org/conferences/development-american-economy-program-meeting-spring-2023

 

A Penny for Your Thoughts

Walker Hanlon, Northwestern University and NBER

Stephan Heblich, University of Toronto and NBER

Ferdinando Monte, Georgetown University and NBER

Martin B. Schmitz, Vanderbilt University

 

Legal Activism, State Policy, and Racial Inequality in Teacher Salaries and Educational Attainment in the Mid-Century American South

Elizabeth U. Cascio, Dartmouth College and NBER

Ethan G. Lewis, Dartmouth College and NBER

This paper was distributed as Working Paper 30631, where an updated version may be available.

 

US Educational Mobility in the Early Twentieth Century

Martha J. Bailey, University of California, Los Angeles and NBER

Abdul Raheem Shariq Mohammed, Northeastern University

Paul Mohnen, University of Pennsylvania

 

The Value of Ratings: Evidence from their Introduction in Securities Markets

Asaf Bernstein, University of Colorado at Boulder and NBER

Carola Frydman, Northwestern University and NBER

Eric Hilt, Wellesley College and NBER

This paper was distributed as Working Paper 31064, where an updated version may be available.

 

Germ Theory at Home: The Role of Private Action in Reducing Child Mortality during the Epidemiological Transition

James J. Feigenbaum, Boston University and NBER

Lauren Hoehn-Velasco, Georgia State University

Sophie Li, Boston University

 

“Muddling Through or Tunnelling Through?”: UK Monetary and Fiscal Exceptionalism during the Great Inflation

Michael D. Bordo, Rutgers University and NBER

Oliver Bush, Bank of England

Ryland Thomas, Bank of England

The Importance of Douglass North

 

I just listened to an episode Econ Roots, in which Mike Munger was interviewed about the importance of Douglass C. North. Like myself, Munger went to Washington University and worked with North. His answer to why North was important was that “he had a view of economic history that took time seriously.” He notes, for example, that North would ask about where preferences came from rather than taking them as given.

It is a great podcast episode, but my personal answer to the question would be slightly different because I had recognized the importance of explain changes in institution over time before I read North. As an undergraduate at the The Evergreen State College the two books that had the biggest impact on me were Samuelson’s Economics and Thorstein Veblen’s Theory of the Leisure Class.

The neo-classical economics of Samuelson immediately made sense to me. I found the use of models to analyze individuals maximizing subject to constraints and interacting with other people doing the same to be an incredibly powerful tool.

Then I read Veblen. Veblen argued that economic theory was fine as far as it went, but it didn’t go far enough. In his first book, The Theory of The Leisure Class (1899), he explained that, "The institutions are, in substance, prevalent habits of thought with respect to particular relations and to particular functions of the individual and of the community: and the scheme of life, which is made up of the aggregate of institutions in force at a given point in the development of any society, may on the psychological side be broadly characterized as a prevalent spiritual attitude, or theory of life." (Veblen 1912, 190) Thus, “the evolution of society is substantially a process of mental adaption on the part of individuals under the stress of circumstances which will no longer tolerate habits of thought formed under and conforming to circumstances in the past." (Veblen 1912, 192) To Veblen this process of cultural change should be the central concern of economists: He argued that both the preferences and constraints that economic theory takes as given change over time and answering the biggest questions in economics requires understanding how they change over time.

So, I was persuaded of both the utility of economic theory and the need to explain how the things that influences those choices, including preferences, change over time.

I know that Doug read Veblen when he was younger, but I don’t think he was influenced by him, at least consciously. I don’t know if he ever read Samuelson. Yet what North provided me was a link between institutional change and economic theory. And the link ran in both directions. He provided an approach that made it possible to talk about the impact of institutions on market performance and to use economic theory to try to understand how institutions changed. The idea of transaction costs provided a means to connect different institutional arrangements to the performance of markets. Transactions costs create a wedge between buyers and sellers. The more resources you must use trying to enforce agreements or protect your property the less mutually beneficial trades will exist. Effective institutions can lower the cost of transactions, encouraging trade, investment, and innovation.  Economic models can also be used to try to explain differences in institutions and how they change over time. The first thing I read by North was a “Framework for Analyzing the State in Economic History,” followed immediately by Structure and Change. In both he used a simple model of a wealth maximizing ruler to explain institutions that do not maximize economic output. He asked why wealth maximizing ruler might not create rules that maximized output for the country, creating the largest possible pool of wealth to extract revenue from. The answer in this model was that the ruler faced a transaction cost constraint and a competition constraint. The wealth maximizing institutions might entail higher costs of collecting taxes than institutions that lead to lower levels of output. For instance, selling a monopoly might be an easy way to raise revenue but not one that is likely to maximize output. This is the transaction cost constraint. The competition constraint arises from the fact that wealth maximizing institutions might be ones that enhance the power of potential competitors to the ruler. For instance, international trade might increase output but also increase the wealth and power of people who present a potential threat to the ruler.

For me, Doug’s work meant that I didn’t have to choose between Samuelson and Veblen.

 

North, Douglass C. "A framework for analyzing the state in economic history." Explorations in economic history 16, no. 3 (1979): 249.

North, Douglass Cecil. Structure and change in economic history. Norton, 1981.

Relative Values (with special reference to the antebellum period)

 

This is the second post related to Sharon Ann Murphy’s recent paper "The Financialization of Slavery by the First and Second Banks of the United States," in the Journal of Southern History (Murphy 2021). I started it several months ago, but just got around to finishing it. As with another paper published earlier this year in Enterprise & Society, Murphy converts monetary figures from the first half of the nineteenth century to comparable current values:

“On October 5, 1818, Baltimore residents Philemon C. Wederstrandt, Henry Didier Jr. (in trust for Rebecca Smith), and Henry Thompson entered into a seven-year partnership to purchase the Magnolia Grove plantation from Samuel B. Davis. Sugar prices were on the rise, and this fully operational plantation in St. Bernard Parish, Louisiana, would enable the Baltimoreans to get in on the lucrative emerging market. Included in the purchase price of $140,000 (about $3 million in 2020) were the land, buildings, improvements, stock, crop, utensils, and forty-three enslaved workers (Murphy 2021, 385).”

These relative values are reported to provide a sense of the magnitude. I suspect that most people would think that $140,000 was a large amount of money in 1830. But how large? Comparable values are an attempt to answer that question. Murphy reports that the relative value of $140,000 in 1818 was $3 million in 2020, but what does that mean?

Around the same time that Murphy’s paper came out, someone showed me a Twitter discussion about relative values in which one of the participants in the discussion suggested that calculating relative values was complicated, but that one could use a simple rule of thumb to approximate such calculations. They went on, however, to question the utility of calculating relative values for the antebellum period because of the chaotic money and banking system that existed before the Civil War.

The purpose of this post is to show that

(1)    the calculation of relative values is not that complicated,

(2)    that a rule of thumb cannot produce a reasonable approximation, and

(3)    that the antebellum banking system, though quite different from our own, was not so chaotic as to eliminate the utility of calculating relative values.

Perhaps the person on Twitter was an aberration, though no one was disagreeing with them. If they were an aberration, this post probably isn’t necessary, but I’m going to go ahead and post it on the off chance that there may be other people who do not understand relative values.

 

Calculating relative values by adjusting for inflation

 

I’ll come back to the Murphy paper, but I’m going to start with a more recent example. Reportedly both Muhammad Ali and George Foreman were paid $5 million for their 1974 fight in what was then Zaire. Five million dollars is still a lot of money today, yet most people know that prices were generally lower in 1974 so that $5 million would have purchased more than it does now.  It would have been more valuable than $5 million is now. One way to understand how much more valuable $5 million would have been in 1974 is to ask how much we would need today to purchase the same amount of goods and services at today’s higher prices. In other words, what amount today would purchase as much as $5 million did in 1974? Answering this sort of question is the most common approach to calculating relative worth. It is done by adjusting for changes in the overall level of prices as measured by a price index.

If, for instance, the overall level of prices doubled between 2002 and 2020, you would need $200 in 2020 to buy what $100 bought in 2002. In that sense, the $100 in 2002 is comparable to $200 in 2020. Because prices are twice as high in 2002, we need to multiply 2002 value by 2 to get the 2020 relative value. If prices had been 3 times as high, we would have to multiply by three. If we know the price level in two different years, we can figure out how much we need to multiply by to find the relative value.  

The most commonly used measure of the price level is the Consumer Price Index (CPI). Using the Consumer Price Index if we want to know what value in one year (year x) is comparable to a value from another year (year y) we use this simple formula

Dividing the CPI in year x by the CPI in year y tells you how many times higher the price level was in year x than in year y. For example, the CPI in 1974 was 49.33 and the CPI in 2020 was 258.81. If you divide 258.81 by 49.33 you get 5.2465; overall prices were a little more than 5 times as high in 2020 as in 1974. If we multiply $5 million by 5.2465 we get $26,232,516. You would need $26 million in 2020 to have the same purchasing power as $5 million in 1974.

Murphy used the website measuringworth.com to do these conversions. You can go to measuringworth.com and plug in a value, the year that value is from, and the year that you want to use for comparison, and it will give you’re your answer. But measuringworth.com is just doing what I described above. The CPI is 12.33 for 1818 and 258.81 for 2020. Dividing 258.81 by 12.33 gives 20.99. Multiplying 140,000 by 20.99 gives 2,938,637. Measuringworth.com rounds to 2,940,000, and Murphy describes it as about $3,000,000.

If you use measuringworth.com, you will find that it actually gives you a number of different options for the relative value. These are the ones for the $5 million dollars in 1974 relative value in 2020.

 

Rather than adjusting for changes in prices one can try to understand how large a value from the past was by comparing it to other things. Ali’s $5 million was 919,117 times the average hourly wage of a production worker ($5.44). For a fighter to make 919,117 times the average hourly wage of a production worker in 2020 ($32.54) they would need to earn $29,908,088 (labor value using production worker wages).

Alternatively, you might try to understand how large some value was by considering how large it was relative to total output. GDP in 1974 was equal to $1,545,200,000,000 or about $1.5 trillion. If you divide $5,000,000 by $1,545,200,000,000 you find that what Ali got paid was equal to a very small fraction (.00000032358) of the total U.S. GDP in 1974.  But how much would a boxer have to get in 2020 for it to equal the same fraction of GDP as Ali’s pay? GDP in 2020 was $20,893,700,000,000 (almost $21 trillion). If we multiply that GDP by .00000032358 we get $67,608,400 (economic share relative value).

 

Notice that it gives you different options for commodities and income, but those aren’t the important distinctions in terms of the actual calculation.

Like adjusting for changes in the price level the math is not complicated, but why might you take these alternative approaches rather than just adjusting for changes in prices? In his most recent book, The Ledger and the Chain Joshua Rothman includes some of these conversions as well as the conversions based upon changes in prices.

 

Although most people simply adjust for changes in prices, describing the relative size of some past value in terms of average wage or GDP may provide a more accurate sense of how large a value was because it takes into consideration the increase in real incomes and output not just the change in prices.

 

Why you cannot use a rule of thumb to adjust for changes in the price level

The conversation on Twitter suggested that one could use a basic rule of thumb: multiply values for 1830 by 60 and values from 1860 by 30, for instance.  Why won’t a simple rule like this work? Note that when you are adjusting for changes in the price level between year y and year x you are using the following formula

If you want to know what value now is comparable to some value from a year in the past (year y) you put the current CPI in the numerator (CPI year x) the current CPI and the CPI for the earlier year in the denominator (CPI year y). This number will only decline steadily over time if prices rose steadily over time. Prices in the nineteenth century did not rise steadily over time. The figure below shows the Consumer Price Index for the 19^th century. The overall trend was downward, and it was anything but steady.

Consumer Price Index, 1800-1900

 

 

The figure below shows the CPI for 2020 divided by the CPI for each year, which is the number you would multiply a value by to estimate the comparable value in 2020. For instance, the highest peak is 35.7 in 1844; $100 in 1844 would be comparable to $3,570 in 2020. You can also see that you should multiply values from 1860 by more (32.11) than values from 1830 (28.94).

 

CPI for 2020 Divided by the CPI for Each Year, 1800-2020

 

 Even if prices had followed a steady trend a simple rule of thumb wouldn’t work because prices are still changing. The correct multiple is the current CPI divided by the CPI in the year for the value you are converting (shown for 2020 in the above graph). The numerator in that fraction, the current CPI changes every year, so the correct multiple changes every year. You would have to update your rule of thumb on a regular basis, which would kind of diminish its utility as a rule of thumb. As prices continue to rise the line in the above graph will continue to shift upward. You would have to continually recalibrate your rule of thumb.

 

The system of money and banking before the Civil War does not render calculation of relative worth meaningless.

Both Rothman and Murphy write about the antebellum period. Consequently, we need to consider the argument that the antebellum money and banking system interferes with out ability to determine relative values.

The system of money and banking before the Civil War was quite different than ours.

The value of the U.S. dollar was legally defined in terms of precious metals, both gold and silver were legal tender. One dollar was equivalent to a certain amount of each metal, which meant that there was also a defined exchange rate between the two metals. As of 1834, the U.S. dollar was defined as 23.22 grains of pure gold.

So legally, the value of a dollar was the same wherever you were in the country, a dollar was worth a certain amount of gold or silver. But people also used bank notes as money. States chartered banks, and these banks issued notes that were redeemable at the bank they were issued from. A bank note acted as money to the extent that people believed that they could redeem it for the stated amount without incurring significant cost. To the extent that people were uncertain about whether a note would be redeemed or that redeeming a note would be costly, the note was discounted: you might get only $97 of gold or goods in exchange for a $100 note. Because there were hundreds of different banks, there were hundreds of different notes and discount rates. This system is sometimes portrayed as one of extreme chaos and uncertainty, in which there was no way to really know the value of money. Consequently, every transaction required bargaining not just over the value of the good but over the value of the money that was being used to pay for it.

Research doesn’t really support this view of a completely chaotic monetary system.  Because it was important to know the value of different banknotes, some people collected information on the going rates of discount and published it in newspapers or specialized bank note reporters. Economic historians have studied these published discounts.  The notes of new banks were more heavily discounted than those of established banks (Gorton 1996). Notes from banks that enacted regulation requiring adequate backing for notes were discounted less than bank in states that did not (Rolnick and Weber 1988). Bank notes tended to trade at par near the bank they were issued from (Ales et al 2008). That means that if you were in Philadelphia your $20 note from an established Philadelphia bank was basically as good as gold. As you moved away from the point of issue the discount tended to increase because of increased uncertainty and increased cost of presenting the note to the issuing bank. Bank note discounts reflected factors that influenced the riskiness of the bank (Gorton 1999). In general notes were discounted more heavily the higher the expected cost of redemption and the greater the expected risk of default. All this adds up to a market in which people appear to have been well enough informed to reasonably evaluate the value of notes. People using local notes from established banks would have valued them at par because of low cost of redemption and low risk of default. People did not have to bargain over the value of money for every transaction.

In addition, people that regularly needed to move large amounts of money from one part of the country to another knew of the potential problems associated with taking money from one part of the country to another and developed means of minimizing these problems. The larger the potential costs the more people had an incentive to find solutions. See Bodenhorn (2003) and Schermerhorn (2015) for some of ways in which people used things like business connections and bills of exchange to deal with problems associated with moving funds from one place to another.

It is true that the value of a dollar varied from one place to another in the antebellum period. The value of a dollar varied from one part of the country to another for the same reason that the value of a dollar varies from one part of the country to another today: the price level varies from one part of the county to another. Below is a map from the Tax Foundation showing the relative value of $100 in each state in 2017. 

 

Finally, while it is true that the world of antebellum money and banking is very different than our own, the world in which people do not have to worry about how to pay for things when they travel is fairly new. Much of our money supply is checkable deposits, but people do not have to accept you check any more than people during the antebellum period had to accept your banknotes. Now we count on using our credit cards, but in 1970, still only 16 percent of households had a bank credit card. When they traveled, they couldn’t expect people to accept their out of town checks. They had to carry cash or travelers checks.

 

The Bottom Line

The calculations for these comparable values are simple and (I think) reasonably intuitive. The hard part is creating the numbers that go into the calculation. Collecting the data on prices and wages and production from the past and determining how to use it to come up with the best estimates of the price level, or average wages, or GDP that you can. It is important to note that we still produce estimates of these values today. Even with all the resources we use to collect and analyze data we don’t get the True value. That’s just not the way the word works. In general, the further you go back in time the less data you will have and it may not be the data you would ideally like to have. But they do not need to be perfect. Historians generally report estimates of relative values to try to convey the magnitude of some value from the past not to make an argument about the exact or true relative value.

 

 

References

Ales, Laurence, Francesca Carapella, Pricila Maziero, and Warren E. Weber. "A model of banknote discounts." Journal of Economic Theory 142, no. 1 (2008): 5-27.

Bodenhorn, Howard. State banking in early America: A new economic history. Oxford University Press, 2003.

Gorton, Gary. "Reputation formation in early bank note markets." Journal of political Economy 104, no. 2 (1996): 346-397.

Gorton, Gary. "Pricing free bank notes." Journal of Monetary Economics 44, no. 1 (1999): 33-64.

Jaremski, Matthew. "Bank-specific default risk in the pricing of bank note discounts." The Journal of Economic History 71, no. 4 (2011): 950-975.

Murphy, Sharon Ann. "Securing human property: Slavery, life insurance, and industrialization in the upper south." Journal of the Early Republic 25, no. 4 (2005): 615-652.

Murphy, Sharon Ann. "Collateral Damage: The Impact of Foreclosure on Enslaved Lives during the Panic." Journal of the Early Republic 40, no. 4 (2020): 691-696.

Murphy, Sharon Ann. "Enslaved Financing of Southern Industry: The Nesbitt Manufacturing Company of South Carolina, 1836–1850." Enterprise & Society (2021): 1-44.

Murphy, Sharon Ann. 2021. "The Financialization of Slavery by the First and Second Banks of the United States." Journal of Southern History, 87 (3) 385-426.

Rolnick, Arthur J., and Warren E. Weber. "Explaining the demand for free bank notes." Journal of Monetary Economics 21, no. 1 (1988): 47-71.

Rothman, Joshua D. The Ledger and the Chain: How Domestic Slave Traders Shaped America. Basic Books, 2021.

Schermerhorn, Calvin. "Slave Trading in a Republic of Credit: Financial Architecture of the US Slave Market, 1815–1840." Slavery & Abolition 36, no. 4 (2015): 586-602.