Final Review Flashcards
How did Fogel define the concept of social savings?
Definition: The difference between what it would cost to ship goods in a world with railroads and what it would cost to ship the same goods on the same routes without using railroads. Importance: Fogel used the social savings concept to determine how the absence of railroads would have restricted the development of the American economy.
How does Fogel calculate the social savings?
If we had all the information we wanted, we could measure social savings as the change in consumer surplus, as shown in class. This is approximately equal to: Social Savings = (MCwater – MCrailroad) * Qrailroad If P=MC, then we cal also calculate social savings as (Pwater – Prailroad) * Qrailroad However, if P does not equal marginal cost (for example, under oligopoly), this method of estimating social savings may lead to incorrect results. Fogel argues that his alpha figure exaggerates the real social savings of intraregional trade because many of the farms in 1890 were in production only because of the availability of low-cost rail service. Basically, without cheap rail transportation the cost of shipping crops from some farms to markets by alternative means would have exceeded the total market value of the crop.
How does the concept of counterfactual play into Fogel’s analysis of intra-regional trade?
The counterfactual, as we discussed on the first full day of class, has as its ultimate goal to understand how the world would have been but for something happening. In this analysis, we’re trying to figure out: What would the United States (and, particularly, U.S. economic growth) have been like in the absence of railroads? Fogel constructed a “Beta estimate” to reflect that world without railroads would have been different in ways besides just shipping costs. Fogel makes a few assumptions for this analysis. He assumes that in this counterfactual world: 1. More canals could have been build in the absence of railroads. He maps exactly where these canals would be. With railroads, they would not have been economically viable. 2. The additional canals would have allowed more land to be suitable for agricultural, but some land would have still been too far from markets for non-subsistence farming. 3. Without railroads, roads would likely been of higher quality, lowering the cost of wagon transport. With these assumptions (and many more for how to value things), Fogel comes up with a social savings of $175 million. However, this is only for four crops. With a bit more guessing, Fogel come up with a bottom line: The social savings could have been no more than $560 million, or 4.7% of GNP.
How did slavery and indentured servitude differ?
They’re similar in the sense that you purchase both. Treatment differed? People Indentured Servants Indentured Servants were People who were transported to America free of charge in exchange for selling their labor for a set period of time [note: in class, Prof. Miller said this was the primary difference] to someone in America. “Indentured Servitude was a credit system financing intercontinental transportation, providing a link between the English labor supply and colonial demand to the colonies…through this mechanism the servant borrowed against the future returns to his his/her labor. The indenture was a promise to repay a loan, for which the servant was the security (p. 40).” Slavery On the other hand, slavery was a system in which involuntary participants [and their children] would be held for life by the person who had paid for their passage.
Say you were a 1755 Virginia tobacco farmer. Would you purchase an in. servant or a slave, and why?
I would choose an indentured servant because the high price of shipping makes transporting slaves more costly while simultaneously increasing the amount of people who would need to use indentured servitude as a economic mechanism to finance the cost of transportation to the American colonies thereby lowering the price of labor (ie the wage rate) for indentured servants (p. 47-48).
Say you were a 1855 Georgia cotton planter. Would you purchase an in. servant or a slave, and why?
I would purchase a slave because there has been a decline in the costs of ocean shipping as ocean shipping productivity has increased thereby lowering the price of price of slave labor [increasing the amount of slaves supplied] while simultaneously raising the price of indentured servants’ labor [the lower shipping costs allow more potential indentured servants to pay for their own way to the United States, shifting their labor supply curve to left because quantity supplied at each wage level has decreased] (p. 48- 49) In the graph below, a decrease in transportation costs has shifted the supply of slaves down. However, the share of indentured servants has decreased – more people can now afford to move to US without it.
What was the primary form of economic activity in the South in 1745?
Agriculture (employed 85 percent of the colonial labor force) [commercial; tobacco, rice, indigo, or cotton]
What was the primary form of economic activity in the South in 1840?
South: Plantation Agriculture (“King” Cotton, tobacco was no longer commercially successful - intensive cultivation of the “noxious weede” [tobacco] had led to soil depletion and demand for tobacco had begun to wane in the 1790s, rice, sugar)
What was the primary form of economic activity in the South in 1880?
South: (p. 386- 389)continued to grow cotton (decreased demand [demand curve shift] and increase in prices), rice, sharp drop in per capita income after the civil war, the number of plantations increased while the average size decreased. Sharecropping emerged as the dominant work arrangement between white plantation owners and freedmen.
What was the primary form of economic activity in the North in 1745?
New England: Shipping [employed between 5 and 10 percent of the entire colonial labor force; large supply of timber], the primary form of agriculture was purely for subsistence purposes
What was the primary form of economic activity in the North in 1840?
New England: Industrialization began in New England. (By 1840, when absolute agricultural employment in Massachusetts was at its peak, the share of labor in agriculture was only 40 percent) Cotton textile industry takes hold in this region because New England towns offer adequate waterpower for spiining mills given the amount of rivers and streams.
What was the primary form of economic activity in the North in 1880?
New England: (p. 403) Farms increased by about 20% [compared with the Midwest where the amount of farms triple after the Civil War and the far West where the amount of farm s increased sevenfold.] (p. 458) In 1860, most American industry \was widely dispersed, rural, small-scale, and simple. Most of the nation’s manufacturing was concentrated around New York and Philadelphia
What was the primary form of economic activity in the West in 1745?
West: Agriculture [employed 85 percent of the colonial labor force]
What was the primary form of economic activity in the West in 1840?
West: Agriculture [foodstuffs like grain, wheat], beavers, sea otters, bison for fur
What was the primary form of economic activity in the West in 1880?
West: The Midwest had developed a substantial industrial sectors [especially Chicago - 80,000 workers in manufacturing]. Processing industries less than a third of the urban industrial population of the Midwest. Industries such as furniture, clothing, machinery, printing and publishing supplied local and regional markets, employed almost sixty percent of the midwest’s urban population.
What were the 6 characteristics of early American Industrialization?
1.(sans vowesl): PITCHFACE Decline in Household production 2. Decline in the number of the craftsmen after 1815 3. Rise of factories, what is a factory 4. Rise of corporations 5. Protectionism 6. Rise of textile Industry
What was sharecropping?
Positive Incentives of Sharecropping: both parties have a clear stake in maximizing output and thereby rapidly adjusting to changes in weather or price expectations (there are no barriers to adjusting work schedules). They weren’t lifetime arrangements, they were renegotiated annually (good for sharecropper [higher wages], good for owner [find a new tenant if his sharecropper was falling behind expected output, highz competition among tenants that might force sharecroppers to work hard as renters] Adverse Incentives: No incentive for the tenant to expend effort preventing soil erosion or contribute to capital investment [repairing fences, improving breeding stock, etc…]
What was GDP per capita in the antebellum era?
overall it increased. From $350 in 1710 to $2650 in 1880 (in 1989 $).
What was life expectancy in the antebellum era?
up and down. Additionally, some technological improvements at first hurt life expectancy: initially running water made people sicker, as it diffused what used to be a localized problem with bad wells.
What was population growth in the antebellum era?
huge – 55 births per 1000 women.
What was birth rate in the antebellum era?
Nearly as high as humanly possible.
What was death rate in the antebellum era?
Lower than in Europe (more space). More death in the South.
What was the quality/quantity of goods consumed in the antebellum era?
Standard of living went up; availability of cheap textiles. 1. 1830s = Introduction of the stove, coffee grinder. 1850s = Canning, sewing machine In 1750, you would be sleeping on straw with one blanket; by 1850 you would have a feather beds with sheets. Meat Consumption was very high in America. a. Americans ate on average at 180 lbs/ yr.
What was average height in the antebellum era?
The S was generally taller than the N. Within the same region of the country, heights of workers different significantly across occupations. Farmers and white-collar workers are taller than common laborers (the shortest), all else being equal. Soldiers enlisting in the Civil War got significantly shorter as the war went on. “Antebellum Puzzle”: Why was per capita GDP rising and heights falling? People were leaving agriculture toward manufacturing.
How did slavery influence American economic development?
Slavery contributed greatly to American wealth, income and economic well-being. It led to the development 2 largely distinct commercial regions. The south had more fertile land and a better climate for growing crops that required slave labor (tobacco, cotton). This forced the north to industrialize. The elimination of slavery further separated the US into a rich north and a poor south. The slave trade began in the U.S. in 1607, and was eliminated by 1808, when the international slave trade was officially banned. By this time, ~660,000 slaves had been imported.
Why was there no slavery in the North?
There actually was slavery in the north. Slavery spread throughout the colonies after the first slaves arrived. But the big difference between the north and the south was that between 1777 and 1804, all the northern states individually implemented laws to end slavery.
What is theory #1 for as to why the First Industrial Revolution occurred in New England?
- The soil was not fertile at all (except for along rivers). It was horrible for growing crops. For this reason, New England was forced to industrialize.
What is theory #2 for as to why the First Industrial Revolution occurred in New England?
- In New England, women and children were highly unproductive in agriculture. When a large labor force isn’t productive agriculturally, there is a low wage labor force for factories.
Draw some graphs that explain why the First Industrial Revolution took place in New England.
Draw two graphs. The first one should be “Mfg in NE.” Have MPL on the y-axis. Have Amount of Labor on the x-axis. Have a line, MPL of agr, steeper than MPL mfg. Have – intersecting only the MPL mfg – a total labor force in NE. The second should be “Mfg vs Agr in Ohio,” and should have a less-steep line for agriculture.
What are cotton textiles?
Cloth that is lightweight, washable, and colorfast.
What role did cotton textiles play in the Industrial Revolution?
The first textile mills were in New England. If either supply or demand shifts to the right, production of cotton textiles would increase. This is because factories were made, so it became easier to make large quantities of cotton cheaply (economies of scale) and because à supply shift out.
How could the increase in the production of cotton textiles be attributed to supply?
huge factories churning out more cloth.
How could the increase in the production of cotton textiles be attributed to demand?
Increased demand due to import substitution, growing population, transportation improvements
Why did slavery persist in the South?
1) The industrial revolution causing increased demand for and production of cotton textiles 2) The cotton gin 3) Slave labor, in particular, was used to grow cotton because “cotton was the only form of production lucrative enough to draw slave labor out of sugar cultivation in the Caribbean”
What role did cotton play in the persistance of slavery in the South?
[*Note, southern soil was actually very conducive to growing cotton] Eli Whitney invented the Cotton Gin in 1793. This invention allowed for faster de-seeding of cotton, which allowed the South to go from producing 100,000 bales of cotton in 1801 to producing 5.4 million bales of cotton in 1859 Slave labor, in particular, was used to grow cotton because “cotton was the only form of production lucrative enough to draw slave labor out of sugar cultivation” High value relative to weight; light, durable, and easy to ship Additionally, slave labor was very valuable and earned an incredibly high rate of return for planters
What are the costs and benefits of gradual emancipation?
Advantages of gradual emancipation No or limited taxpayer expenses, Time to adjust, Costs primarily borne by slaves. Northern owners bore little costs. Cost: About $210 million; a loss of female slaves would account for a loss of 3% of slave wealth. Problems: Slaveowners would still have paid a small price under this scheme because of the loss of that portion of female slave value attributable to potential gains from reproduction. Moreover, it consigned all current slaves to life sentences and encouraged owners to works young slaves more intensively since their continuing productivity after emancipation was a matter of no economic interest to the profit-maximizing owner (p. 360)
What are the costs and benefits of sudden emancipation?
● Government purchases slaves at market price and frees them ● This would have cost $2.7 billion and would have been messy due to the fact that slaves were different ages, etc. ○ This was about ⅔ of US GDP ● The government didn’t have the money around so it would have had to finance the expenditure with bonds ○ 30 years at 6% >>> would require that 5% of subsequent years’ GDP would be taxes that would be used to pay down the debt
How much did a slave cost in 1860 dollars?
In 1860, a prime male unskilled field slave was $1800
How much did a slave cost in 1860 in today’s dollars?
There has been considerable difficulty in adjusting prices across time because the universe of goods and services is different CPI (determined in terms of foregone consumption) then was about $46,000 Wage for unskilled labor was about $.10 per hour (about $7.50 today) Can figure out how many hours unskilled labor would have to work and how much money that would give us 1800/.10 = 18,000 >> 180,000 hrs x 7.50 = 135,000 Per capita income then was about $128 and in 2007 was about $46,000 So, cost of a slave today could be anywhere from $46,000 to 600,000 today
Why did Philip Ulrich say slavery was profitable?
Philip Ulrich has said that slavery was not profitable because slave prices rose dramatically between 1845 and 1860 (by about $700) and cotton prices did not rise by nearly as much
Why is Ulrich’s idea for slavery profits probably wrong?
However, if slavery was truly unprofitable, we should have seen: Manumission - the voluntary freeing of slaves Discouragement of slave births (which did not happen) Falling prices of slaves
Did Conrad and Meyer find slavery profitable?
Conrad and Meyer took a different approach, treating a slave as a productive asset and calculating the rate of return using a model similar to the capital asset pricing model (CAPM). They estimated that the rate of return on a slave was about 8% to 10% per year
How did slaveholders benefit from slavery?
Slaveholders benefited as the price of slaves rose, which would happen if profits were high and more people entered the market. With supply of slaves fixed, profits that could be extracted by driving slaves hard was already incorporated into the price of slaves They tended to buy slaves later on after demand for them was well known. Slaveholder profit was Ps - Wb - Ws - t (per slave per year) Where: wb is the cost of producing cotton textile ( in England) wa is the cost of growing cotton (labor, transportation and storage) ws is the cost to maintain slaves Ps is the price of slave t is tariffs If Price was equal to MC, slaveholders had a profit of 9 and didn’t truly benefit They had an incentive to get into the market early and maximize the output of their slaves Harsh treatment and punishment
How did consumers benefit from slavery?
Main points: Every consumer benefited from slavery ∆CS = (w(a)+w(b)–P(slave))(Q*-Q(slave)0.5). Refer to graph!!
How did taxpayers benefit from slavery?
Those in the North and West benefited from lower taxes, since tariffs helped bring in government revenue instead.
What was the average birth weight for a slave?
o Average birth weight for slave baby = 5.1 lbs. This is very very low and definitely not healthy.
What was nutrition like for slave children?
Your average slave child was smaller than the average child living in the slums of Lagos, Nigeria today. Indicated horrible nutrition.
What was nutrition like for slaves?
o Slaves received on average 4,185 calories daily o Corn and pork = 2/3 of those calories.
What was the chance of whipping? What were the consequences?
Over 2 years, 45% of slaves were never whipped. Large open wound on your back = high risk for infection – potentially life-ending
Did the treatment of slaves vary by age?
- American slaves were treated poorly as young children and babies but given more food when it came to puberty and other times of growth – then they pumped up the protein consumption in order to get a good worker.
How does one calculate the cost of the Civil War?
Calculating the cost of the Civil War involves the summation of all war-related expenditures and losses, which is termed the “direct” estimate. This statistic includes all Union and Confederate war expenditures, and human and physical capital destroyed in military actions. This is incomplete, however.
What was the direct cost of the Civil War for the North?
TOTAL DIRECT COST TO THE NORTH: $3,365,846,000 (1860 dollars)
What was the direct cost of the Civil War for the South?
TOTAL DIRECT COST TO THE SOUTH: $2,892,709,000 (1860 dollars)
What was the indirect cost of the Civil War for the North?
Present value in 1861 of the decrease in consumption, which resulted from the war. Basic assumption is that per capita consumption would have expanded at a constant rate after 1860 such that hypothetical consumption was equal to actual consumption by 1879. $4.515 billion 1860 dollars
What was the indirect cost of the Civil War for the South?
8.970 billion 1860 dollars
