There is a new working paper by Mark
Stelzner and Sven Beckert The
Contribution of Enslaved Workers to Output and Growth in the Antebellum United
States that attempts to estimate the significance of enslaved labor to the American
economy. The essence of the approach is to use slave prices to estimate slave
production. The price of a slave should reflect the value of output that the
enslaved person is expected to produce. They then use estimates of production
in 1839 and 1859 to estimate the contribution to growth.

My initial reaction is that recognition
that cotton was not the only good produced by enslaved people is long overdue, and their
approach generally makes sense, though I need more time to consider the specifics.
And I find the results plausible. That said, their estimate of

This post was prompted by
a new paper that Fohlin and Lu have on the Panic of 1907 in the most recent AEA
Papers and Proceedings, “How Contagious
Was the Panic of 1907?  New Evidence from
Trust Company Stocks.”

One of the central questions
about the Panic of 1907 is “Why were New York City trust the target of runs
rather than banks?” For a long time, the answer to this question was that
people ran on trust companies because they were new and under-regulated “shadow
banks.” Moen and Tallman added that trust companies were not members of the
Clearinghouse Association and therefore did not have access to that
associations ability to act as a lender of last resort. I argued that trust companies
were not new, they had been around since the 1820s, and were far from
unregulated. Moreover,

I finally finished grading and had a
chance to read a bit more of Levy’s Ages of American Capitalism. I finished
the Age of Capital but still have ages of control and chaos to get through. These
may take a while; the closer we get to now the less history interests me.
In the meantime, I’ll provide my second impression on the book. See here
for the first impression.

As a reminder, Levy is trying write a
story of American economic history that is more engaged with economics than previous
work in the New History of Capitalism (by the way, I think this criticism was probably
more valid when Levy began the book than when he finished it) and is organized
around three theses.

Thesis #1: “Rather than a physical
factor of production, a thing, capital is a process through which a legal

The following excerpt is from The
History of the City of Fredericksburg, Virginia prepared by Silvanus Jackson
Quinn for the Common Council of the City of Fredericksburg in 1908.  Unfortunately, it does not provide any
citations for the story. Nevertheless, parts of the story ring true: the initial hope that justice would be done, the disappointment when it was not, the loss of faith in the government institution, and the authors repetition, a half century after the events, of the belief that it was absurd to think that formerly enslaved people should be compensated.

Last week I wrote some thoughts about Jonathan Levy’s new
book Ages
of American Capitalism. My copy of the book arrived, but I have been too
busy with classes to get to it. I did, however, find it interesting that a new working
paper from the NBER presented a model of business cycles that (to me at least)
sounded very similar to Levy.

Here is how
I described Levy’s theory:

“My reading
of Levy’s second and third theses together is that he thinks that a preference
for holding wealth in a liquid form needs to be overcome to get capitalists to
put their assets in things like new farms and factories etc. That this
something extra can come from government or culture or both, but it tends to
come and go in booms and busts, and growth is a result of the booms. I think
there is a lot to this

If you want to get some idea of what’s new in economic history check out the program for the NBER Development of the American Economy Program’s Spring Meeting(contains links to papers and presentation slides)and the program for the annual meeting of the Economic History Society(contains links to abstracts)

Hagley PrizeThe
prize is awarded jointly by the Hagley Museum and Library and the
Business History Conference to the best book in business history
(broadly defined). 2021 Recipients·         Marcia Chatelain, Franchise: The Golden Arches in Black America (WW Norton: 2019).·         Ben Marsh, Unravelled Dreams: Silk and the Atlantic World, 1500–1840 (Cambridge: 2020). 2021 Finalists (in alphabetical order)·         Marcia Chatelain, Franchise: The Golden Arches in Black America (WW Norton: 2019).·         Jennifer Delton, The Industrialists: How the National Association of Manufacturers Shaped American Capitalism (Princeton: 2020).·         Jan de Vries, The Price of Bread: Regulating the Market in the Dutch Republic (Cambridge: 2019).·         Zachary Dorner, Merchants of Medicine:

The video of Historians
and Economic Historians in Conversation from Economics for Inclusive
Prosperity is now available. The conversation includes Trevon Logan, Jonathan
Levy, Suresh Naidu, Gavin Wright, Caitlin Rosenthal and Shari Eli is available
now.

My brief summary is that historians and economists should
try to communicate more even when it is difficult. Communication would be
easier if historians learned more about quantitative analysis and economists
spent more time in archives.

I also liked Shari Eli’s observation about the loss of context
in much of economic history. I remember Doug North describing economic history
as telling a story constrained by theory and evidence, and I sometimes think
that economist economic historians have become so focused on getting the theory

1.      
Was Fogel wrong?

Hornbeck, Richard, and Martin Rotemberg. Railroads,
reallocation, and the rise of American manufacturing. No. w26594. National
Bureau of Economic Research, 2019.

Here
is an attempt to explain the argument to a wide audience.

The NBER working paper came out last year
but the paper started getting more attention this year and was presented at the
meeting of the Economic History Association. Fogel estimated the impact of railroads
in the late nineteenth century was less than 4% of GDP (which is actually quite
large) but Hornbeck and Rotemberg used a new approach that examined the impact
of increases in market access on manufacturing productivity and estimate an
impact closer to 25% of GDP.

2.      
Was Turner right?

Bazzi, Samuel,

This post was prompted by some things I have seen on the
internet lately (especially Twitter) about economic models. Specifically, I am
referring to suggestions that economists shouldn’t teach the model of perfect
competition, or should de-emphasize it, because markets in the real world are
not competitive.

These suggestions reminded me of one of my favorite papers Margaret
Levenstein’s presidential address to the Business History Conference "Escape
from equilibrium: thinking historically about firm responses to
competition." Enterprise & Society (2012): 710-728.  Levenstein understands what models are for. The
point of economic models is not to copy reality or to create jars that we can
sort different markets into: This market goes in perfect competition; that market
goes in

Richard
Thaler has an essay in the New York Times about Covid shots in which he
advocates a
combination of auctions and “nudges.” As always there are interesting
responses on Twitter. I saw several people suggesting that it was affine illustration
of the evils of modern economics. I have a hard time seeing that.

First,
lets start with the auction part. Thaler starts from the position that markets
should not be used to allocate the shots. In the market solution, the shots
would those who have the greatest willingness and ability to pay. He says that
obviously that shouldn’t be done, but he notes that if market prices are not
used to ration the limited number of shots then some other means of rationing
must be found. He seems to want a distribution plan something like I have seen

I finally had a chance to read the NBER working paper by Lisa
Cook, Maggie E.C. Jones, David Rosé, and  Trevon D. Logan on The Green Books and the Geography of
Segregation in Public Accommodations. They identified the locations of
businesses listed in the Green Books and then analyzed how they changed over
time as well as how the locations were related to other characteristics of the areas where  they
were located.  Their primary conclusions
are described in the abstract:

Jim Crow segregated African Americans and whites by law
and practice. The causes and implications of the associated de jure and de
facto residential segregation have received substantial attention from
scholars, but there has been little empirical research on racial discrimination
in public accommodations during this

I was talking to some students today about how Sears expanded
from selling watches by mail to selling everything by mail. In the early
twentieth century you could even by a house from Sears. We started talking
about how Amazon had gone from selling books to selling everything, and one
student told me you can now buy tiny houses on Amazon, which I had not known.

Here are some Sears houses

 To see more Sears houses go here

Here are some houses available on Amazon

If you want to see more homes on Amazon just search Amazon.  Amazon is currently being prosecuted for violation of
European antitrust laws. Sears on the other hand has recently gone through
bankruptcy, though it’s not clear that there is actually something there to save.

Amazon has incredible size and

Historically
Thinking Al Zambone talks to Sharon an Murphy about her book Other
People’s Money: How Banking Worked in the Early American Republic

The Economic History
Podcast is relatively new but has several episodes up now including one
with Lisa Cook talking about racial violence, innovations. The Planet Money
episode with Dr. Cook is also very good.

Coffee with Cornelius, podcast with Cornelius Christian, has
several episodes with economic historians. You can watch his youtube
channel or get the audio from a variety of places like itunes or google

Gregory Clark on genetics and the
Industrial Revolution

Anton Howes on the Industrial
Revolution

Mark Koyama on religious persecution
and state capacity

Charles Calomiris on the political
economy of banking

James

Mary and I wrote an op-ed about the possibility of using bankruptcy law to reduce the economic impact of the pandemic that was published by the Washington Post’s Made by History.We found out this morning that we won the first in a series of prizes that the Stanton Foundation is awarding for applied history articles related to the pandemic.

There is a lot of anxiety about the state of the economy.
Coronavirus is spreading, the stock market is falling, treasury yields have
reached an all time low. So, of course, I decided to write a long post
about the American economy in the early nineteenth century. 

                In  "The United States as a DevelopingNation: Revisiting the Peculiarities of American History." Past & Present (2019) Link
and Maggor seek to direct our attention toward the peculiarity of America’s economic
history by encouraging us to consider the United States in the first half of
the nineteenth century as a developing country. They also suggest that the key
to understanding this transformation may lie in industrial development policies
at the state level. Link and Maggor encourage historians to think

We received our copies of Bankrupt in America: A History of Debtors, Their Creditors, and the Law in the Twentieth Century 

also available at Amazon

I previously posted an overview of the book but here is a description of each of the chapters.

Chapter 1 Introduction

The introduction acquaints the reader with what is already
known about bankruptcy in the twentieth century, describes the methods used in
the book, and previews the central argument. The chapter begins with a broad
overview of the laws and procedures governing the collection of unpaid debt at
the state and describes federal bankruptcy. The text highlights the interplay
between state and federal law. It introduces the interdisciplinary literature on
bankruptcy, emphasizing the need for an analytic framework that

Trump claimed that "In just three short years, we have shattered the mentality of American decline," by reversing the disastrous policies of the previous administration. Anyone who has been paying attention knows that this is probably not true, since he said it. I don’t have time to address all of his lies (see this article in the Washington Post), but its not hard to show that there hasn’t been any sharp break in terms of the economy

The unemployment rate is low, but it has been falling for about a decade. One could argue it was falling more rapidly before he too office. It fell 2 percentage points in the last three Obama years, but only 1.2 percentage points in the first three Trump years.

GDP is increasing, but again it has been since the last

Bankrupt in America: A History of Debtors, Their Creditors and the Law in the Twentieth Century by Mary Eschelbach Hansen and Bradley A. Hansen is available from Amazon and The University of Chicago Press. It is part of the Markets and Governments in Economic History series edited by Price Fishback.

I’m going to do few posts about the book, starting today with an overview of the book. Bankrupt in America

Though the U.S. Constitution granted it the power to create
a bankruptcy law, Congress did not pass the first permanent bankruptcy law until
1898. Bankruptcies rose from about one per 10,000 people annually in the first
decades of the twentieth century to about one per 300 people at the turn of the
twenty-first century. Bankrupt in America
explains the how bankruptcy evolved from an

I’m not sure how much of an impact the
1619 Project will have on the public, but it has certainly gotten a lot of academic
historians wound up. Historians at the American
Institute for Economic Research and the World
Socialist Web Site have both criticized the Project. Talk about politics
making strange bedfellows. Peter
Coclanis is the latest to criticize it. And, of course, everyone with a
Twitter account has an opinion. More than a few seem to be of the opinion that
the entire project is tainted by bias and invalid. Others are certain that the
biases of the critics are the problem.

I’m
not an opponent of the project. I agree with Beckert and Rothman that “American
slavery is necessarily imprinted on the DNA of American capitalism,” And there
is a lot of recent and ongoing

Bankrupt in America: A History of Debtors, Their Creditors and the Law in the Twentieth Century will be published by The University of Chicago Press in January 2020.In the meantime, here are the review quotes:

Lee J. Alston, Indiana University

“Bankrupt in America is a tour de force analysis of bankruptcy legislation and its impact over the twentieth century. It shows the interplay among state and federal legislation, economic conditions, social stigma, and the role of certain individuals in accounting for changes over time and across states. The authors offer an institutional and cliometric account that deftly draws on economics, history, law and political science. It will become the resource for many scholars, and I hope legislators.”

Hugh Rockoff, Rutgers University

“Mary

I’m writing this because Nikole
Hannah Jones said on Twitter that she was trying to understand the argument
that economic historians have against the work of Edward Baptist but had a problem
with some of the terminology used by economists. I usually try to avoid
economic jargon, but today I have tried even harder. If there are terms that
are unclear please let me know. I’m also writing this because Ben Schneider suggested I give it a try.

I can write this without reference
to economic terminology because, although I could point to problems related to economics,
the fundamental flaws in the book arise from Baptist’s historical methods, not
his economics. In The Half Has Never Been Told, Baptist misrepresents previous
scholarship on slavery, misrepresents the content of primary sources,

A couple of weeks ago Vox.com published and essay by Jared
Bernstein titled “What
economists have gotten wrong for decades: Four economic ideas disproven
by reality.” I was unaware of it until a discussion emerged on twitter last
week, in which people were offering explanations for why economists were not
only wrong but wrong in ways that harmed lower income people
disproportionately. The discussion was irritating because it was premised on
the assumption that Bernstein’s essay was a accurate, when nothing could be further
from the truth. The four economic ideas are not economic ideas at all. 

Bernstein begins by describing Alexandria Occasio-Cortez
questioning Jerome Powell, the Chair of the Federal Reserve, about the natural
rate of unemployment:

“The topic was the so-called

This post started out as my attempt
to understand an argument that John Wallis was making about institutions, but
it kept expanding. I’m posting it now because fall semester is approaching and
we are supposed to get the galleys for our book in the next couple of days. In
other words, I need to stop messing around with this and get to work.

Thorstein Veblen (1899)

“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,

We are visiting my family in Kearney, Nebraska. When we are
here in the summer we go for walks in the nearby cemetery. There is a lot of
shade there, and many of the tombstones are interesting. For instance,

I looked over and said that looks like land leveling
equipment, and it was. At the bottom it says “He left the land better than he
found it.” Nebraska, particularly the part west of the 100th
meridian has historically been a relatively dry place (although the south side of Kearney was under water when we got here after a storm dumped about 9 inches of rain). There is, however, a lot
of water under the ground, making it possible to produce water intensive crops if you can irrigate your fields.

One method of irrigation is to lay a pipe along the side of
the field. Water

“The past is never dead. It’s not
even past.” William Faulkner, 1951.

“You think it’s dead but de past ain’t
stopped breathin’ yet.” Zora Neale Hurston, 1934.

The past is obviously central to discussions of reparations for slavery. At the hearing on a commission to study reparations
Ta-Nehisi
Coates cites Ed Baptist’s The Half Has Never Been Told, claiming
that 60 percent of GDP was accounted for by slave produced cotton and that the
value of slaves was greater than all other assets combined. Both statements are
incorrect. Baptist (and the historians who have not called him out on the errors
in his book) can be blamed for the first error but not for the second.

Coates is wrong about the percentage
of GDP accounted for by slave labor because Baptist is wrong.

The following

Gavin Wright’s Tawney Lecture  Slavery and Anglo-American Capitalism Revisited is now available

In We Can
Build the Roads, and Other Things Too Mike Munger argues that roads are not
public goods and that the examples of Sweden and Finland support this argument.
I think there are a few problems with this argument.

One problem arises from the way we tend to explain public
goods in economics. We tell students that they are non-rival and non-excludable.
Rival means that one person’s use of a good diminishes the benefit for other
users: if you drink my coffee that will diminish the benefit that I get from
it. Excludable means that it is possible to exclude other people from using a good
at a reasonable cost. In fact, I generally do not have any problem keeping
people for drinking my coffee. The most common example of a public good is
national defense. The benefit you get from us not