Created: 1999-07-02
Last Modified: 1999-07-02
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Reading Notes for September 29, American Exceptionalism I

Economics 210a, Fall 1999

Alfred Conrad and John Meyer (1958), "The Economics of Slavery in the Ante-Bellum South," Journal of Political Economy 66:1 (1958), pp. 95-130.

Back before Conrad and Meyer, most historians would have told you that pre-Civil War American slavery was unprofitable--that investments in slaves yielded less than market rates of return, that slavery was an inefficient and unprofitable mode of production, that slaveholders held slaves in order to promote their self-image ("aristocrats" and "cavalier fops"), and that America's Peculiar Institution was clearly on its way out for economic reasons well before the Civil War.

We could talk about the historiography of this belief--and make snide and nasty comments about the political and cultural motivations of those who argued that slavery in America would have died a natural death in the late nineteenth century whether or no their was a Civil War...

But I would prefer to talk about Conrad and Meyer. Are they right? If they are right, then how could this be? We all know that, in the bloodless language of high theory, of all labor contracts the slave "contract" is the most incentive-incompatible. Surely it would have been more efficient to give the worker some "property" in his or her labor--make her a wage laborer or a tenant farmer or at least a serf? How, then, are we to explain what Conrad and Meyer find?

Robert Fogel (1979), "Notes on the Social Saving Controversy," Journal of Economic History 42:1 (March), pp. 1-54.

This is a long article by Robert Fogel (his Economic History Association Presidential Address). By "social saving" Robert Fogel means a particular kind of counterfactual calculation: What would have been the reduction in national income in a particular, fixed year if industry X--in this case the railroad--had not existed, if the location of people and economic activity had remained the same, and if the capital and labor that were employed in industry X were instead employed in the next-best substitute that could have carried out its functions, industry Y.

In Fogel's case--applied to the railroad industry in the United States at the turn of the century--Fogel's answer was "4%." The average American worker would have been 4% less productive had the railroad not been invented, and had people instead relied for transportation on steamboats pulling barges up rivers and canals and on wagons.

The standard reading of Fogel's argument is that railroads were not "indispensable" for American economic development. But there are other readings as well...

John Coatsworth (1979), "Indispensable Railroads in a Backward Economy: The Case of Mexico," Journal of Economic History 39:4 (December), pp. 939-60.

John Coatsworth carries out Fogel's social saving calculation for Mexico during the Porfiriato (the rule of President-for-(Nearly-)Life Porfirio Diaz during the generation before 1910). In striking contrast to the 4% social saving for the United States estimated by Fogel, Coatsworth estimates 40%!

Pre-WWI Mexico as it was would simply have been impossible without the railroad: people could not have lived where they lived and done what they did and still remained alive.

Yet Coatsworth also wants to say that the railroad did not have a strong positive effect on Mexican economic growth. Instead of "developing" Mexico, Coatsworth says, the railroad "underdeveloped" Mexico. What does he mean? Is he right?

Moses Abramovitz and Paul David (1973), "Reinterpreting American Economic Growth: Parables and Realities," American Economic Review 63:2 (May), pp. 428-39.

In the introduction to their paper Abramovitz and David are trying to make, in a subtle and indirect way, a point about the content of much macroeconomic modelling. What point are they trying to make? (I think it is a true and important point.) And do you think that Michael Kremer has gotten it? (I don't. I also don't think that Robert Lucas has gotten it. But, then, I am at bottom a historian and not a theorist...)

What are Abramovitz and David trying to teach us when they talk of the "Great Traverse," and speak of economic growth as a series of "technologically-induced traverses, disequilibrium transitions between successive growth paths"? What criticisms are they making of standard growth accounting techniques?

And what ways of analyzing economic growth do they argue should take the place of the conventional growth-accounting framework?

Alfred Chandler (1977), The Visible Hand: The Managerial Revolution in American Business (Cambridge: Harvard University Press), pp. 1-12, 285-314.

How is it that America came to be dominated by big businesses? What were the sources of those big businesses' competitive advantage? Why were there no big businesses back in the very old days?

And just what is it, exactly, that managers do that makes their role worthwhile?

These are the big questions that Alfred Chandler tries to answer in The Visible Hand and in his other big books about the rise of big business and business management in America. I think that he does a relatively good job.

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Professor of Economics J. Bradford DeLong, 601 Evans Hall, #3880
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