The Great Depression II: Keynes and Friedman on the economics:
http://j-bradford-delong.net/2007_ppt/20071008_113_ppt.ppt
http://j-bradford-delong.net/2007_mov/20071008_113_ppt.mov
http://j-bradford-delong.net/2007_audio/113_8_10_07.mp3
The Great Depression: Economics 113 (Audio): American Economic History Lecture for October 3, 2007:
How did the world slide into the Great Depression anyway?
Audio: http://j-bradford-delong.net/2007_audio/113_10_03_07.mp3
Handout: http://delong.typepad.com/aeh/2007/10/the-great-depre.html
In the twentieth century measured U.S. real GDP per worker increased by nearly 300%. True real GDP per worker probably increased by about one percent per year more--for a total growth over the century of some 700%, perhaps. The fall in the work year with the spread of the eight-hour day, the paid vacation, and part-time work means that total output per workhour probably grew by 850%.
Relative to this--very strong--long- run growth, all of the business cycles of the nineteenth and twentieth centuries are small potatoes. Only the Great Depression is powerful enough to cause any substantial interruption of long-run growth.
Audio: http://j-bradford-delong.net/2007_audio/113_10_03_07.mp3
September 24 Large Audio File. Streaming Audio File.
September 26 Large Audio File.
Growth, Industrialization, Wages, and Profits
Labor: Education and Immigration:
Immigration
Education
Capital, Finance, and Technology Intermixed:
From Shafts to Wires:
Four areas:
U.S.-Canada very rich: rest not so. Why?
The Puzzle: We Explain United States Growth as Markets + Resources = Accumulation + Technology
Three Theories:
The Poverty of Riches:
Advantages of Equality:
Middle-class demand for manufactures: "American system"
Timing of industrialization
For those wanting an easy download of mp3 and m4a files, general Berkeley lecture and other recorded audio archive files for this fall will be at:
Main Headings:
Cleanup from last lecture
Who were the real slavelords? http://delong.typepad.com/113_F07/20070910_cuibono.pdf
Big Quotes:
Abraham Lincoln, 1858: I am not, nor ever have been, in favor of bringing about in any way the social and political equality of the white and black races, that I am not nor ever have been in favor of making voters or jurors of negroes, nor of qualifying them to hold office, nor to intermarry with white people ... I as much as any other man am in favor of having the superior position assigned to the white race. I say upon this occasion I do not perceive that because the white man is to have the superior position the negro should be denied every thing. I do not understand that because I do not want a negro woman for a slave I must necessarily want her for a wife. My understanding is that I can just let her alone...
Abraham Lincoln, 1858: I agree with Judge [Stephen] Douglas [that the Negro] is not my equal in many respects-certainly not in color, perhaps not in moral or intellectual endowment. But in the right to eat the bread, without the leave of anybody else, which his own hand earns, he is my equal and the equal of Judge Douglas, and the equal of every living man... http://en.wikipedia.org/wiki/Lincoln-Douglas_debates_of_1858
Frederick Douglass, 1876: We are here to express, as best we may, by appropriate forms and ceremonies, our grateful sense of the vast, high, and preeminent services rendered to ourselves, to our race, to our country, and to the whole world by Abraham Lincoln.... He was preeminently the white man’s President, entirely devoted to the welfare of white men. He was ready and willing at any time during the first years of his administration to deny, postpone, and sacrifice the rights of humanity in the colored people to promote the welfare of the white people of this country.... I concede to you, my white fellow-citizens, a pre-eminence in this worship at once full and supreme. First, midst, and last, you and yours were the objects of his deepest affection and his most earnest solicitude. You are the children of Abraham Lincoln. We are at best only his step-children; children by adoption, children by forces of circumstances and necessity.... His great mission was to accomplish two things: first, to save his country from dismemberment and ruin; and, second, to free his country from the great crime of slavery. To do one or the other, or both, he must have the earnest sympathy and the powerful cooperation of his loyal fellow-countrymen. Without this primary and essential condition to success his efforts must have been vain and utterly fruitless. Had he put the abolition of slavery before the salvation of the Union, he would have inevitably driven from him a powerful class of the American people and rendered resistance to rebellion impossible. Viewed from the genuine abolition ground, Mr. Lincoln seemed tardy, cold, dull, and indifferent; but measuring him by the sentiment of his country, a sentiment he was bound as a statesman to consult, he was swift, zealous, radical, and determined... http://www.teachingamericanhistory.org/library/index.asp?documentprint=39
Industry
Alexander Hamilton: Debt, Banks, and Manufactures.
U.S. Revolutionary War hyperinflation: $241 million continental dollars worth $1 million gold dollars by the end of the war.
Value of Revolutionary War debt tripled as debt assumption was discussed and debated.
Megasthenes: the coming of cotton to the Mediterranean...
David Ricardo: Why didn't the U.S. become one big unindustralized Canada?
Could the tariff have been good for the country?
What is the infant industry argument?
The history of the cotton textile business: Samuel Slater, Francis Cabot Lowell, Lowell Massachusetts, et cetera...
Peter Temin's article: the American system:
Consequences for post-Civil War industrialization...
Slavery
The Slave Trade: Guns. Slaves. Sugar/molasses/tobacco/cotton. Very profitable. Extraordinarily inhumane
Adam Smith expected slavery to come to a rapid end after 1776.
Adam Smith was wrong. Why?
What maintains slavery?
The American South
Still slavery persisted; Domar's argument; free land made it impossible to strike the emancipatory bargain--hence the coming of the Civil War...
The Persistence of Southern Slavery the Result of:
Ulpian: Roman jurist: Cui Bono? Who Benefits? Who benefitted from the crime of American slavery?
Do comparative statics with a counterfactual world in which cotton was grown using free labor rather than with slaves...
That is the "cotton is king" problem set that will be handed out on Wednesday, and will be due on the 19th
Or my mouth is smaller than my eyes. Or something.
The canonical course on American economic history spends:
And we have overshot the end of the semester by three weeks.
I have students who have never lived under any president not named "Clinton" or "Bush," students who graduated from elementary school in 1998.
So I am going to try to greatly compress the first half of the course so as to make space for post-WWII economic history: 1865 by week four!
Notes: Northern Agriculture Lecture: Econ 113: American Economic History: Fall 2007
Trying to do something different: a very quick rush through pre-Civil War U.S. economic history to create space in the syllabus to cover post-WWII history.
This week and next week spent trying to do four things:
Smithian Growth
The United States--at least the northern United States--as Adam Smith's Utopia:
Constrast with Engerman and Sokoloff's picture of Latin America: populations to exploit and ways to exploit them create extreme inequality... which has poisonous consequences....
And the colonial economy prospers...
Population
| 1600 | 1,000 |
| 1640 | 24,000 |
| 1680 | 150,000 |
| 1700 | 260,000 |
| 1730 | 650,000 |
| 1780 | 2,700,000 |
Output...
How to even claim to measure output? Nevertheless, we have heroic guesses...
| Year | Y/Pop in 2004$ |
| 1710 | $800 |
| 1775 | $1,100 |
| 1840 | $1,800 |
| 1929 | $8,300 |
| 2004 | $40,000 |
Accumulation
Alice Hanson Jones... data from estates...
Top 20% of households have about 60% of wealth...
Median Wealth Estimates as of 1774:
| Region | Land | Slaves | Other |
|---|---|---|---|
| New England | $2800 | -- | $1200 |
| Middle States | $4800 | -- | $3200 |
| South | $4000 | $1600 | $2400 |
Note that slaves were fully a third of southern wealth, according to AHJ... Big skew in slave ownership...
Politics
| Year | Settlement/Event |
|---|---|
| 1607 | Jamestown |
| 1608 | Quebec |
| 1620 | Plymouth |
| 1624 | New Amsterdam |
| 1630 | Massachusetts Bay Company |
| 1643 | Swedesboro, Pennsylvania |
| 1640-1660 | English Revolution |
| 1689 | "Glorious Revolution" in England |
| 1754-1763 | French and Indian War |
Mercantile System...
American Revolution...
National Population:
1790: 3.9M people, $1100 1840 17.1M people, $1800 1860 31.4M people, $2000
% urban: 5% 1790, 11% 1840, 20% 1860.
"Urban" means "2500 or more"...
City sizes: 1790: NY 33, PH 29, BO 18; 1840: NY 313, Balt 102, NO 102, PH 93; 1860 NY+Brooklyn 1081, PH 565, Balt 212.
Why this pattern? Transport: Erie Canal, C&O Canal, Mississippi-Missouri-Ohio river system. The coming of the railroad to keep NO from surpassing NY... New York Central RR, Pennsylvania RR...
SF in 1860: 15th among American cities with 57K people...
Conquest: Northwest territories, inland southeast and War of 1812, Louisiana Purchase, Florida, Texas, Mexican Cession, Oregon Territory, Alaska "Seward's Folly", Hawaii. Conquest keeps land abundant, hence keeps wages high.
Relatively fast increase in output per capita in the U.S. before 1860. A puzzle that growth was so fast. The puzzle set out for your inspection... Implication: an enormous increase in effective land and natural resources per worker from 1790 to 1860. Population grows. Accessible natural resources grow significantly faster... A handout on growth accounting, resources, and the pre-Civil War U.S.
Alexander Hamilton: Debt, Banks, and Manufactures.
U.S. Revolutionary War hyperinflation: $241 million continental dollars worth $1 million gold dollars by the end of the war.
Value of Revolutionary War debt tripled as debt assumption was discussed and debated.
Megasthenes: the coming of cotton to the Mediterranean...
Format of the first midterm exam...
David Ricardo: Why didn't the U.S. become one big unindustralized Canada?
Answer: the tariff
Could the tariff have been good for the country?
Answer--yes, if the infant industry argument holds.
What is the infant industry argument? There has to be some benefit--external to the firm and to the worker--from production. Future productivity has to be positively influenced by past production in order to make it beneficial in the long run to upset the Ricardian pattern of comparative advantage.
The infant industry argument is plausible, but not certain, for the case of U.S. textile manufacture.
Even so, it's not good for the cotton-exporting tariff-paying south.
The history of the cotton textile business: Samuel Slater, Francis Cabot Lowell, Lowell Massachusetts, et cetera...
Peter Temin's article: the American system
The Crystal Palace exhibition What is special about American industry Eli Whitney Interchangeable parts The "American System" Resource-using technological style.
Consequences for post-Civil War industrialization...
During the pre-industrial early-modern period, 1400-1700, high Eurasian civilizations projected power across oceans...
I. Ming China--Zheng He's prestige voyages
But...
II. Seaborne Empire
Holland in late seventeenth century:
III. Conquest and Occupation: Spain in the New World
IV. Slave Raiding
Firearms change things
Terrible consequences for African civilizations...
V. Plantation Agriculture on the Sugar Islands
VI. Small-Farmer Settlement
The sixth--small farm settlement--was, to contemporaries, the least attractive--it was what you did when you couldn't do anything else.
The sixth was also, in the long run, the most productive as far as economic growth is concerned.
The United States--at least the northern United States--as Adam Smith's Utopia:
Y = F(A, N/L, H/L, K/L)
Constrast with Engerman and Sokoloff's picture of Latin America: populations to exploit and ways to exploit them create extreme inequality... which has poisonous consequences....
And the economy prospers...
| 1600 | 1,000 |
| 1640 | 24,000 |
| 1680 | 150,000 |
| 1700 | 260,000 |
| 1730 | 650,000 |
| 1780 | 2,700,000 |
Output... How to even claim to measure output?
Nevertheless, we have heroic guesses...
| Year | Y/Pop in 2004$ |
| 1710 | $800 |
| 1775 | $1,100 |
| 1840 | $1,800 |
| 1929 | $8,300 |
| 2004 | $40,000 |
Accumulation
Alice Hanson Jones... estates...
Top 20% of households have about 60% of wealth...
Median Wealth Estimates as of 1774:
| Region | Land | Slaves | Other |
|---|---|---|---|
| New England | $2800 | -- | $1200 |
| Middle States | $4800 | -- | $3200 |
| South | $4000 | $1600 | $2400 |
Note that slaves were fully a third of southern wealth, according to AHJ... Big skew in slave ownership...
Politics
| Year | Settlement/Event |
|---|---|
| 1607 | Jamestown |
| 1608 | Quebec |
| 1620 | Plymouth |
| 1624 | New Amsterdam |
| 1630 | Massachusetts Bay Company |
| 1643 | Swedesboro, Pennsylvania |
| 1640-1660 | English Revolution |
| 1689 | "Glorious Revolution" in England |
| 1754-1763 | French and Indian War |
Mercantile System...
Source: Wikipedia.
Source: Martha Olney.
Source: Census via Walton and Rockoff and Martha Olney.
4:10:
Good afternoon. This is economics 113--American Economic History. I am Brad DeLong. The section leaders--GSIs--are Vikram , Marc Gersen, and Adam Jack Gomolin.
We are going to try to save trees this year. So instead of handing out a 30-sheet packet, we are handing out one sheet with web addresses:
http://delong.typepad.com/aeh/: Course Website
http://delong.typepad.com/aeh/2007/08/logistics-econ-.html: Logistics
http://delong.typepad.com/aeh/2007/08/american-econom.html: Syllabus: Readings and Assignments
Throw everything up on the web for reference. But I am not a great fan of Powerpoints. Dim lights--people fall asleep. People don't take notes. We really don't understand that much about education. Best chance is when you are engaged in processing the information.
We are also administratively inept this semester. At the start of August, we in the economics department belatedly recognized that while we had scheduled this class and you had signed up for it, we had not assigned anyone to teach it. Hence a search for somebody qualified to teach this, pliable, and free to teach 4-5:30 MW. Hence me. But the interaction of this process with August vacations means that we are behind in our organization of this course.
Sections: M 9-10A, 71 EVANS; Tu 4-5P, 85 EVANS; W 8-9A, 310 HEARST MIN; Th 4-5P, 85 EVANS; F 2-3P, 5 EVANS; F 3-4P, 5 EVANS.
Economics 113 is an upper-division economics course in the study of the history of the U.S. economy that satisfies the political economy historical context requirement. We will survey over three hundred years of history, but inevitably focus more intensely on those incidents that the instructor finds particularly interesting. This is an economics course: we will spend most of our time looking at events, factors, and explanations, using economics to understand history and history to understand economics. Economics 113 must be taken for a grade if it is to be used toward the requirements for the political economy or the economics major.
My assignments are three: to talk, and to tell you what to read, and to try to get you to think. Your assignments are six: to come to lectures and listen, to contribute to section discussions, to take the exams, to do the problem sets, to write the papers, and to do the web assignments.
GRADING...
A word on the last: the web assignments. It is an experiment. It may be a total flop. You are guinea pigs and since you are guinea pigs I owe you a brief sketch of what I am thinking.
Let us back up for a second to the origins of the university in medieval Italy. The German Emperor Federico II has a problem, as you may suspect given that he is a German emperor and his friends call him Federico. 1000 miles as the crow walks from Hamburg to Palermo...
Needs judges, clerks, administrators...
When eight centuries ago years ago the emperor Federico II establishes the University of Naples and names Roffredo of Benevento as its Rector, he wants one thing: a steady supply of literate bureaucrats to work for him who had been taught that holy scripture and secular prudence both advise that emperors boss popes and not popes emperors. To that end Federico offers low-interest student loans and lavish promises of cushy government jobs to students who come to Naples. (And threatens to confiscate the property and imprison the parents of those who go to school out of state.)
Why? Books... Hand copying... printing... University stays, and lecture stays. But not enough active, not enough interaction...
Hence we are going to dip our toes into the water and experiment a little bit...
WEB ASSIGNMENTS...
LOGISTICS...
SYLLABUS...
Now let's get going:
Why care about American economic history?
Initial settlement
30-100 million people in the Americas in 1490. Compare to 100-150 million each in Europe, China, India. Tenochtitlan at 100,000+ larger than Paris at 70,000.
Corn miraculous: 40-to-1 yield ratio, compared to 5-to-1 for contemporary wheat or rye... but corn not nutritionally complete. People get short. Farmers all get short. And farming carries you across a mammoth organizational shift. Thugs with spears. Thugs with incense. Maya, Toltec, Mound Builders, Chimu, Inca, Aztecs
Yet: Pizarro: 168 men. Cortez: 500 men.
The Indians in Peru, Dobyns concluded, had faced plagues from the day the conquistadors showed up--in fact, before then: smallpox arrived around 1525, seven years ahead of the Spanish. Brought to Mexico apparently by a single sick Spaniard, it swept south and eliminated more than half the population of the Incan empire. Smallpox claimed the Incan dictator Huayna Capac and much of his family, setting off a calamitous war of succession. So complete was the chaos that Francisco Pizarro was able to seize an empire the size of Spain and Italy combined with a force of 168 men. Inca Empire: Smallpox: 1525. Typhus (probably) in 1546, influenza and smallpox together in 1558, smallpox again in 1589, diphtheria in 1614, measles in 1618. We're down to 5 million or so in 1600.
Animals and diseases that cross the species barrier...
Technological and organizational gradient: corn, potatoes, squash, beans, stone tools, no wheels, no big animals that are domesticable besides the llama...
Why this big technological gradient? Two heads are better than one. And writing is really important. As I understood Diamond's agricultural argument, Eurasia's agricultural advantage had multiple causes. The multiple causes were indeed that Eurasia had "better" flora (for our long-run purposes: grains with larger seeds), but more importantly that Eurasia was bigger, and that because Eurasia runs East-West rather than North-South knowledge about effective agricultural techniques diffuses much more rapidly and successfully. Add all these reasons together and you can see why Eurasia is (still) the most densely populated region of the world, and why the world's diet is based on wheat, rye, rice, and their cousins.
I thought that one of Diamond's points was that American Indians had done rather well--with corn and potatoes--even though the original flora was not that appetizing (have you ever seen a wild corn plant?). But two heads are better than one. Add Eurasia's large size coupled with easy diffusion along the East-West axis and "better" wild grains and it would have been extraordinary if New World agriculture had been more developed than Old World. Had the American Indians been given enough time, then even with low population densities they might have selectively bred and domesticated sumpweed. But their independent history was cut short in 1500...
5:20: Geography Quiz
Comment Policy: A Seminar, Not a Foodfight
I want this to be a seminar, not a foodfight. So trolling comments get deleted, usually--I don't have time to moderate this properly, but I am trying.
Comments on this comment policy are welcome here
.J. Bradford DeLong, Professor of Economics at U.C Berkeley, a Research Associate of the NBER, a Visiting Scholar at the Federal Reserve Bank of San Francisco, and Chair of Berkeley's Political Economy major.
It's the summer. No regular office hours. Emailing delong@econ.berkeley.edu for an appointment also produces good results.
The Seventeen-Year-Old is going to college next year, which means that I need to think about making more money. (The idea that one might write checks to rather than receive checks from universities is now strange to me.) So I have signed up with the Leigh Speakers' Bureau which also handles, among many others: Chris Anderson; Suzanne Berger; Michael Boskin; Kenneth Courtis; Clive Crook; Bill Emmott; Robert H. Frank; William Goetzmann; Douglas J. Holtz-Eakin; Paul Krugman; Bill McKibben; Paul Romer; Jeffrey Sachs; Robert Shiller;James Surowiecki; Martin Wolf; Adrian Wooldridge.
Control Panel Proper:
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