Economics of coercion2

American Negro Slavery
01/29/15Greg Pratt, Mesa Community College

Slavery is the ubiquitous
institution in human history
Stanley Engerman

Formal Institution Informal institution

Greg Pratt, Mesa Community College 01/29/15

Command/centralized
Greg Pratt, Mesa Community College 01/29/15

Economic Decision Making

Trans Atlantic 25%
North
Africa/Europe and
Asia
25%
Intra Africa 50%

New World Europe Africa
1600 25 100 50
1700 3 120 45
Today 310 500 1 Billion

Negro males listed in the 1850 census
were engaged in fifty-four different
occupations; only 9.9 percent of them
were unskilled laborers. Some of them
even held jobs as architects,
bookbinders, brokers, engineers,
jewelers, merchants, and musicians.

draymen,
porters,
carpenters,
masons,
bricklayers,
painters,
plasterers,
tinners,
coopers,
wheelwrights,
cabinetmakers,
blacksmiths,
shoemakers,
millers,
bakers, and
barbers

Tobacco per pound 0.50
Corn per bushel 0.969
Sweet potatoes per bushel 3.02
Wheat per bushel 3.24
Cotton per bale 271.00

Demand for labor is a derived demand
Price of output
Productivity of labor
Free labor
Indentured servants
Redeeptioners
Debt peonage
Slavery

Liberty
Individualism
Laissez faire
Egalitarianism
Populism
Except for slaves – their position was
increasingly subject to greater coercion

The major
expansive force in
the US economy
from 1800 -1850:
Douglas North

Time on the Cross Fogel and Engerman

To this point it might be useful to pause and consider
this nascent slavery in the United States along the
lines of economic growth, welfare and decision
making.
Economic growth – hazy
Economic welfare – general improvement for society
– slave welfare evolving – much less free – we’ll see
what Fogel has to say in a minute
Decision making – evolution overall

antebellum Southern farms were 35
percent more efficient overall than
Northern ones and that slave farms in
the New South were 53 percent more
efficient than free farms in either North
or South.

This would mean that a slave farm
that is otherwise identical to a free
farm (in terms of the amount of
land, livestock, machinery and labor
used) would produce output worth
53 percent more than the free.

“Economic history is about the performance of
economies through time.” North

Are you better off today, than . . .
Braudel – material life
Examples
Live longer
Live “better”
reduction in average work week from
68 to 36 – seems to be a preference for leisure
over work

Adam Smith – system of natural liberty
emergent and evolutionary – a spontaneous order that
allows participants in society to use their own
knowledge for their own aims without coercion
Hayek

Contra to Smith’s system of natural liberty
Centralized
Coercive
Planned
Adaptively inefficient

Flexible
Error and Trial
Receptive to change
It is adaptive rather than allocative efficiency which is
the key to long run growth.

Successful political/economic
systems have evolved flexible
institutional structures that can
survive the shocks and changes
that are a part of successful
evolution.

Voluntary
Involuntary

Buy and Sell
Life time
Inherited through the
mother

Nature of man – angels or humans?
Theory of Moral Sentiments – impartial spectator as a
mechanism to address humanity
Slavery inefficient
The Wealth of Nations – pursuit of self love will guide
society to ends that no one could either anticipate or
intend

Was Adam Smith correct?
Who benefited?
What was the nature of the
institution?

Slave auction records
Estate inventories
Plantation records
Slave narratives
Abolitionist materials
Church records

Slaves worked more intensively
Methods of production – gang system
Plantation v diversify farm
Slaves responded to incentives?

Negative – Simon Legree
Reduced Rations
Prevent marriage
Sell family
Whippings
Mutilation
Death
Positive – Inducements
Days off
Private plots
Cabins
Marriage
Pay
Manumission

Sundays off
Bonuses in cash or in kind, or
Quit early if they finished tasks
quickly.
Keep part of the harvest
Own small plots
Sell their own crops.

In antebellum Louisiana, slaves even had under their
control a sum of money called a peculium. This served
as a sort of working capital, enabling slaves to establish
thriving businesses that often benefited their masters as
well.

because slaves constituted a
considerable portion of individual
wealth, masters fed and treated
their slaves reasonably well. . . ,
teenaged and adult slaves lived in
conditions similar to -- sometimes
better than -- those enjoyed by
many free laborers of the same
period. 01/29/15Greg Pratt, Mesa Community College

US South - slaves West Indian
Slaves
Africans White workers in
the US
102.0 88.0 89.0 100.0

Calories – potatoes v sweet potatoes
Living conditions – city v rural
Type of work – indoors v outdoors
Impact
Health
Child mortality
Height

The entire US and world – cotton was the grease for the
Industrial Evolution – textile industry
Textile manufacturers – increasingly inexpensive input
Merchant capitalists – financing and shipping raw
materials and finished goods
Transportation

Banking and finance
Consumers (greater access to and much cheaper
clothing)
In short, . . . the south benefited and, to a greater extent
THE NORTH

1800 – 1860
Prices secular decline
Increasing output per acre and in total
Expansion of the activity
Profits
Adaptively efficient?

• Founding fathers in the late 18th
century believed slavery would die
out within 50 years
• What happened . . .
• The Cotton Gin

The immenent economist Abe Lincoln, in 1858 said
that, with his plan, slavery would die out?
Steve Douglas said, ok, lets accept your assertion . . .
When?
Abe said . . . 100 years

Some would argue that the American
Negro slavery was so adaptively efficient
. . .
New areas for cotton growth
Increasing innovation and
productivity
Expansion of types of activity
Increasing complexity of activity

AN ADAPTIVELY
EFFICIENT
INSTITUTION

Leads to economic growth
Does not necessarily lead to an
increase in individual welfare
Cannot persist with coercive
economic decision making . . . in
the long run.

UN – official end 1970
China - 1910
Thailand - 1905
Brazil - 1888
Cuba - 1886
US - 1863
Haiti - 1804

1860 4 million slaves with a value of 4 billion dollars
This was the size of the US economy (estimated GDP)
This was 40 per cent of total bank assets in the US

600,000 dead (over 50% to disease)
600,000 injured
In 1863 Union estimated daily cost was 2.5
million
10 billion in direct costs by both sides
14 billion in pensions to surviving soldiers
Inflation
Coercion and loss of liberty

NET DIRECT COSTS OF THE CIVIL WAR
in millions of $1860 discounted to June 1861 @ 6%
Category Union Confederacy
Government
expenditures
2,291 1,011
Labor Costs
Undercounted
Because of Draft
11 20
less Labor Costs
Overcounted
Because of Risk
Premium
-256 -178
Net Cost of
Resources
Destruction of
Physical Capital
0 1,487
Destruction of Human Capital
Killed 955 684
Wounded 365 261
Total 3,366 3,286
Source: Claudia Goldin and Frank Lewis, "The Economic Costs of the American Civil War: Estimates
and Implications," Journal of Economic History

The Costs of the Civil War (Millions of 1860 Dollars)
South North Total
Direct Costs:
Government Expenditures 1,032 2,302 3,334
Physical Destruction 1,487 1,487
Loss of Human Capital 767 1,064 1,831
Total Direct Costs of the War 3,286 3,366 6,652
Per capita 376 148 212
Indirect Costs:
Total Decline in Consumption 6,190 1,149 7,339
Less:
Effect of Emancipation 1,960
Effect of Cotton Prices 1,670
Total Indirect Costs of The War 2,560 1,149 3,709
Per capita 293 51 118
Total Costs of the War 5,846 4,515 10,361
Source: Ransom, (1998: 51, Table 3-1); Goldin and Lewis. (1975; 1978)

Government borrowing
Loss of economic growth during the period
1861-1865 (never to be recovered)
Expansion of the doctrine of Total War
Given the cost to eventually eliminate, this
institution had deep economic
underpinings, was productive and, in
aggregate, stimulative to growth and

Doomed to failure due to the coercive nature of the
institution, not due to the moral reprehension of the
practice.
Adaptively efficient institutions persist (Adam Smith
was wrong)
Slavery is a moral vice (Adam Smith was right)

Institutions that are adaptively
efficient and coercive can be very,
very difficult to change peacefully.

Economics of coercion2

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