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Economics 375 American Economic History Slavery and the Civil War Lecture Notes Professor Kenneth Ng College of Business and Economics California State.

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Presentation on theme: "Economics 375 American Economic History Slavery and the Civil War Lecture Notes Professor Kenneth Ng College of Business and Economics California State."— Presentation transcript:

1 Economics 375 American Economic History Slavery and the Civil War Lecture Notes Professor Kenneth Ng College of Business and Economics California State University, Northridge

2 Administrative Details. In-Class Exam Nov. 29 th.

3 Readings Paul Johnson, A History of the American People--Part 3 and 4 for background. Atack and Passell, A New View of American Economic History-Chapters Robert Fogel, Without Consent or Contract. William Mc Neil, Plagues and Peoples, Chapter 5-Transoceanic Exchanges.

4 Slavery-Introduction Explosion of research by Economic Historians into slavery in the post WWII period. Large amounts of resources devoted to collecting and analyzing the slave trade and the system of slavery. Understanding of slavery has been radically altered but because of the climate of political correctness, little of the results of this research has made it into the public schools. Much of the history taught in high schools today is wrong.  The victors write the history.  Abolitionist literature survived down to the present.

5 The Rise of the Atlantic Slave Trade. Slave trade explained by the movement of productive inputs from low to high marginal valued uses.  In the US, there was plenty of land and few people. In Europe, there were more people and less land.  The marginal product of labor was higher in the New World. Nature of the Slave Trade-  Herbert Klein-The Middle Passage-On Reserve. The Slave Trade is an example of the alternative law of supply and demand—where their is a demand, a supply will arise to satisfy it- reallocation of productive resources from low to high marginal valued uses.  Decimation of Amerindian population by disease created a shortage of labor in the New World. Read Mc Neil, Plagues and Peoples.  Some labor reallocated through voluntary relocation-immigration, indentures, etc. but only a limited number of people were induced to relocate through voluntary means. Atlantic slave trade occurred from  Portuguese established trading posts along the coast of the western Sahara.

6 The Height of the Slave Trade Height of the slave trade. Slave Trade was a multi-cultural enterprise.  Blacks captured slaves and transported them to Barricos on the coast to be sold to white traders.  Malaria prevented whites from penetrating the African interior. Slave trade was as much a black as a white undertaking.  Roots inaccurate. Example of Specialization According to Comparative Advantage. The common perception is that slavery was associated with cotton (Gone with the Wind). This is wrong.  Cotton and tobacco were not the most important crops in the slave trade (as opposed to slave system).  Sugar was the crop which drove the slave trade.  80% of slaves were imported before 1810-before cotton production really got going.

7 The Destination of Slaves Before % of slaves went to Iberian peninsula and Iberian islands off the African coast. Grew sugar. After 1550-Center of slave trade shifted across Atlantic to Brazil. New World found as a suitable climate for sugar production. In 1600’s British and French broke Spanish sugar monopoly by establishing sugar production in the West Indies.  Military expedition against Jamaica. By 1770, Spain had been squeezed out of sugar trade. Thus the great majority of slaves were involved in the Sugar trade outside the US. In terms of the slave trade the US was a backwater.  Only 6% of the blacks snatched from Africa were imported to the U.S.

8 The Nature and Character of U.S. Slave System vs. the rest of the New World. U.S. slavery differed from slavery in other parts of the new world because U.S. slaves engaged in Cotton rather than Sugar production.  The absence of sugar culture had a profound effect on the character of US slavery.

9 Differences

10 Differences: Composition of the Population in Slave Societies Percentage of slaves in general population much lower in U.S. compared to Caribbean.  Economies of scale plus climate meant that sugar colonies were heavily black. Sugar plantations were some of the largest economic organizations of their times.  Many plantations had 100’s of slaves-little contact with whites and European culture. Nature of sugar production required heavy labor-cutting the cane and squeezing the sugar out in large presses.  Little productive work for women-led to the importation primarily of men and a sex imbalance among the slave population. In many sugar colonies, whites comprised less than 20% of the population sometimes less than 10% of the population.

11 Differences: Disease Environment. In the Caribbean, the death rate was so high and the birthrate was so low, the slave populations were not self sustaining.  The Caribbean experienced a 2-5% rate of natural decrease among the slave population. Read Mc Neil, Chapter 5.  Explanation for difference is in the disease environment in the Caribbean and the isolation of African populations that were the source of most slaves. Typhus, malaria, tetanus, dysentery. Process of seasoning killed off 30% of the newly arrived slaves in the first year in the New World.  Also, the sex ratio in the slave population explains the rate of natural decrease in the Caribbean.  Less than 40% of the slaves brought from Africa were female. Experience of typical immigrant groups-first wave of immigrants male, followed by successive waves in which the proportion of women increases.  Typically it takes several generations for immigrant population to achieve 50/50 sex balance.  The Caribbean Slave population never achieved this balance. The negative net present value of children in sugar culture provided the slave owner in sugar societies no incentive to promote the birth of children.

12 Isolation of U.S. Slaves from African Culture

13 Differences: Slave Culture in U.S. vs. Caribbean. Through the 19 th century, the majority of slaves in the Caribbean were born in Africa.  Native born blacks comprised the majority of US slaves as early as  By 1860, all but 1% of American slaves were American born. Natural Increase was the main cause of the increase in the US slave population.  Difference between US and Caribbean slave experiences.  US population was self sustaining from the beginning.

14 Differences: Slave Rebellions. Probability of slave rebellion in sugar colonies very high.  Seasoning and the perils of the trip from Africa.  High levels of physical effort demanded.  No women.  No exposure to white culture.  Isolation of whites from outside help. Led to a very brutal system of justice. Successful rebellion in Haiti. Blacks in US were part of much smaller units and were in close personal contacts with white owners. The possibility of a successful slave rebellion had profound effects on the character of slavery in the Caribbean vs. the U.S.

15 Emancipation Outside the U.S. Slavery abolished in British Caribbean and South America mostly before  Emancipation accomplished largely through non-violent methods which included payments to slave owners to compensate them for their financial investments in slaves. In 1860, America left as the last great slave system.  Although the vast majority of blacks brought to the New World as slaves were sent to countries outside the U.S., the more favorable demographic conditions in the U.S. led to a higher survival and reproduction rate of U.S. blacks.  Over time the U.S. slave population grew to be the largest in the world. The U.S. was a minor player in the slave trade, but by 1860 was the Great Slave Power in the world. Question: would slavery have ended without Civil War?

16 Cotton and the Slave Population. Slavery in the U.S.- General Outlines  Although slavery was prevalent in all states in the colonial period, by 1860 slavery was concentrated in the southern states and in cotton production.  Moving South and West, the slave labor force under the direction of it’s white masters created one of the great success stories of American Economic History.  Whitney’s Cotton Gin (1793) enabled short staple cotton to be separated on a competitive commercial basis by mechanical means, enabling the domination of world markets by American cotton.  From 1820 to 1860, cotton output rose by a factor of 11.5, the slave population by 2.5, and output per slave by a factor of 4.6.  From 1790 to 1860 the slave population in the South grew slightly more rapidly than the white population---in the absence of significant slave imports.  Ownership of slaves became more concentrated by the 1850’s. Southern families owning slaves fell from 36% in 1830 to 25% in 1860.

17 The Great Tragedy of the Civil War. Why fight?  Voluntary Emancipation and the failure of the U.S. Constitution.  The usual method of conflict resolution in the U.S. is through non-violent means, e.g. the ballot box. Why was the Civil War so costly to fight—both in lives and material?  Motivation.  Balance of Forces.  Technology and Tactics. Could Slavery have been ended more cheaply?

18 Explaining the Lethality of Civil War. 2 Factors led the Civil War to be very lethal.  Evenly matched opponents-same culture, tactics, weapons, etc. Balance of forces-equally divide country, same culture, tactics, technology and will to fight-leads to long and bloody conflict. Tactics. Generals trained at the same military academies. Many of them knew each other personally. Wars where new tactics and technology are employed for the first time are usually short and not bloody.  Iran/Iraq war employed new tactics developed during the cold war—AirLandSea doctrine of U.S. armed forces.  Early stages of WWII, Hitler employed new tactics- Blitzkrieg.

19 More Technology  Improvements in Logistics Railroads and canal system allowed the concentration of large groups of armed men in the field for extended periods of time. The transportation system also allowed large groups of men to sustain a high level or armed conflict.  Changes in the technology of warfare. Musket vs. percussion cap vs. machine gun and artillery--increased rate of fire of percussion muskets Minnie Ball and Percussion Cap increased rate of fire.

20 Minnie Ball The Minnie Ball made it much easier to force the bullet down the muzzle of a rifle increasing the rate of fire.

21 Flintlock vs. Percussion Cap The percussion cap reduced the number of tasks required to load a rifle increasing the rate of fire of a trained soldier.

22 Technology The Minnie Ball and Percussion cap increased the rate of fire a trained soldier could sustain. For the first time, a disciplined group of soldiers could withstand a frontal charge by infantry or cavalry.  Calvary Attack and Imperial Guard attack at Waterloo (formation of a square) at Waterloo.  Pickett's Charge at Gettysburg  Battle of Rourkes Drift-First Metallic Cartridge Movie Zulu-Rourke's (THE SOUTH WALES BORDERERS AND MONMOUTHSHIRE) drift-4000 Zulus attacked 100 British soldiers. Early battles of Civil War were great tragedies.  Troop morale and irrational expectations during early stages of conflict.  French mutinies during WWI trench warfare.

23 Technology and Tactics The Civil War was a case where the technology of warfare had advanced while the tactics employed by generals had not adjusted. The result was a very high level of lethality.

24 How Many People Died in Civil War?

25 If you were a draft age male what were your chances of being killed or wounded?

26 If you were in the army, what were you chances of getting killed each year?

27 What were your chances of having to serve?

28 The Enormous Human Cost of Freeing the Slaves Civil war was one of the most lethal wars. 1 free person killed for each slave freed.

29 Monetary Cost of Civil War Estimated direct cost of the Civil War was $6.6 billion dollars. Direct cost of $206 for each American in 1861 or almost twice the amount consumed by the average American in 1860, i.e. 2 years wages.  Had the same amount been invested at 6% it could have provided an annuity equal to 10 % of average income.  $6.6 billion was enough to buy the freedom of all the slaves at market prices, provide them with 40 acres and a mule, and still leave $3.5 billion to pay for reparations to blacks for the lost pay under slavery. Spike Lee Production Company-40 Acres and a Mule. From a cost/benefit perspective, the Civil War was a monstrous stupid mistake.

30 Why Fight--Cost of Emancipation to White Southerners in The U.S. constitutional system is good at compromise--division of powers, senate vs. house of republicans, electoral college. Etc. Constitution constructed to force differences of opinion into the political arena and it has largely been a success.  The U.S. is largely free of outbreaks of violence. The constitution and politicians wrestled with the slavery question for decades prior to the Civil War.  End of slave trade in 1810-expected to end system of slavery.  3/5ths Compromise-count each slave as 3/5ths of a person for determining representation.  1820-Missouri compromise (Maine Missouri)  Compromise of 1850 (Land acquired in Mexican/American war)  Kansas Nebraska Act (1854). Ultimately, the constitution failed. Slavery was “ too big ” a question.

31 The end of slavery the one big issue where the U.S. constitution failed. Capital Value of Slaves in 1860 was $2.7 Billion.  Invested at 2.5% this was enough to reduce the value of income to the average southerner by 23%.  Today with an average income of $18,000, 23% of $18,000 is $4140.  To produce this annual income each individual would have to have $165,600 in bank at 2.5%.  Clearly, the end of slavery would have a profound and significant effect on the average white southerner’s welfare. Rationality of the southern redneck-poor white people didn’t directly benefit from slave ownership. Southerners were not going to agree to any system of voluntary emancipation that did not fully compensate them for the value of their slaves. Northerners would have to impose very large tax increases to pay for voluntary emancipation.

32 The Conundrum of the Civil War.—Why did Northerners fight CW? Main Beneficiary of Slavery White Northern consumers.  Why the second half of Fogel’s book (The Ideological and Political Battle Against Slavery) is about the battle to end slavery. Slavery the low cost method of producing cotton.  Gang system of labor.  Hand rating system.  Monitoring costs. Market in slaves competitive so that slave owners earned only a normal rate of return on slave ownership. Market in cotton textiles competitive so that price of cotton bid down to the minimum ATC of production. Consumers who bought cotton textiles enjoyed the benefits of slavery in terms of lower cotton prices.

33 The Indirect Costs of Ending Slavery. Besides the human and financial costs of fighting the Civil War, the end of slavery:  Imposed costs on slave owners who lost the money invested in slaves.  Imposed costs on southern landowners who now had to use their land in its’ second most productive use.  Imposed costs on northern consumers who had to pay a higher price for cotton cloth.  Those who “paid” to end slavery had nothing to gain.  The Civil War was fought on largely moral not economic grounds.

34 White guilt over slavery and “the Great Moral Crusade.” Northerners subjected themselves to huge cost to end slavery which be benefited no one but blacks. Moral explanations of the end of slavery.  Success of the abolitionist movement as one of the great adventure stories of all time. Fogel concludes that whites were not pursuing their narrowly defined self interest (money income) in ending slavery but instead were motivated mainly by moral factors.  Why half of his book, Without Consent or Contract, is entitled “The Ideological and Political Campaign Against Slavery.”

35 Another Big Questions About the Civil War-Would Slavery Have Ended Without a War? History of Civil War has been long fought over. Even today some of the issues are still being fought out.  Example: flying the confederate flag.  Better example: The idea that the CW was fought over saving the Union rather than ending slavery. Denial of credit to whites for having the moral conviction and bearing the human and financial price for ending slavery.

36 Historiography of Civil War (1) In the period prior to the Civil War, abolitionists mounted a public relations campaign against slavery.  Similar to the anti-smoking campaign going on today.  Abolitionists promulgated certain known falsehoods about the nature of the slave system. They argued that “the end justifies the means.”  The victors write the history. The history of the Civil War written immediately following the war was simply the continued preaching the myths of abolitionists. Many of these myths have never really corrected. Post Civil War historians specializing in the the Civil War concentrated in southern universities.  Size and inbred nature of history departments vs. competition in intellectual endeavors.  The active researchers became concentrated in a small number of southern history departments.

37 Historiography of the Civil War (2) Ulrich B. Philips-began publishing around  Argued that slave culture continued because of speculation, economies of scale, and conspicuous consumption.  Therefore,because slavery was not economically viable, slavery would have ended on its own.  Attempt to depict Southerners as victims. Charles Ramsdell- Slave owners were forced to overproduce cotton- irrationality argument-economies of scale.  Natural Limits argument-Cotton production led to soil exhaustion so that slavery required a constant expansion to new lands. As new lands ran out, slavery would have ended. Incompatibility of slavery and urban society. Slave system could not be adapted to urban conditions.  No systematic investigation of profitability of slavery.

38 Historiography of the Civil War (3) The rise of the welfare state, affirmative action, quotas etc.  The legislative battles surround the beginning of the Johnson/Kennedy Great Society programs.  Campaign to get public support for the modern welfare state. Black radicals and Pan-African Studies.  Contemporary theories of black victimization. Fight over the minimization of the Civil War.  Attempt to ignore the human and financial costs borne by whites in the Civil War. The historiography of the Civil War and Slavery is more a lesson in how non-scientists have attempted to distort history to harmonize with the politics of the day or the ideological bias of the writer than an honest attempt by scholars to discover the true nature of the slavery and the causes and consequences of the Civil War. Little attempt to do “good science” and actually measure the profitability of slavery and discover whether slavery would have ended without the Civil War.

39 Was slavery profitable? In the post World War II period, economists began applying economic theory and statistics to the central questions of U.S. history.  Used different sources of data and different methodology than existing scholars.  Quantitative vs. qualitative data. First study by Conrad and Meyer (1958)  Graduate students in economics. Applied simple 200 level economics to profitability question-  Found, not surprisingly, that slave owners treated slaves like factory owners treated expensive machinery.  C&M found that slave owners earned about 5-8% return on slave ownership.  C & M set off debate that refined their estimates. At the end of the debate, it was found that the return on slaves was equivalent to the return on railroad bonds and other non-agricultural 8-10% Evidence that slave owners were calculating businessmen interested only in profit-revolutionary idea at the time. Profitability of slavery undermines the argument for conspicuous consumption.

40 Were Slave owners rational profit maximizing businessmen? Argument over numbers, but additional evidence for rationality of slave owners are age/price profiles.  Failure of conspicuous consumption arguments-why is 26 yr. old more “conspicuous than 32 yr. old or less than 14 yr. old. Age price profiles. Collected data from slave markets. Similar to used car market today where published information is readily available on the price of cars in various conditions. Detailed information about prices and characteristics of slaves recorded and published.

41 Net Income by Sex and Age Shows the net income a slave owner could expect from a typical slave at different ages. Slaves began to cover their cost of maintenance at an early age—late adolescence. Prior to age 15, women earned more than men—tomboys and older sisters. Profile reflects the earlier physical maturation of women. Men and women in professional sports. Ice skating, gymnastics and tennis. For most of life females earned 20-40% less than men Typical in a non-industrial society and reflects the biology of the human body. Reflects the gender differences in societies that rely on physical labor.

42 Accumulated Net Income/Age Profile Shows the total lifetime income a slave owner realized from a typical slave at various ages. Until around age 12, the slave is consuming more than the cost of maintenance—the line is downward sloping. At age 12, the slave begins to produce more than he consumes-the line begins to slope upwards but remains below zero. By age 28, the slave has “worked off” the investment the slaveowner made when the slave was young-the line is above zero. Incentive for slave owner to maintain the slave as a productive asset throughout the slave’s life—the lines stays positively sloped. Slave’s net income remained positive even in old age Incentive for slave owners to keep old slaves—decent treatment of old slaves.

43 Age Price Profile The price of a slave at a given age represents the present value of the expected net income of the slave over his remaining lifetime. At age 0, the slave had a positive price. This means that the slave owner had an incentive to encourage live births. Peak price occurred in the late 20’s and early 30’s. Only in the mid 70’s does ownership of a slave become unprofitable. Slave owners retained a financial incentive to take care of old people.

44 Would Slavery have ended without the Civil War—The Viability Question? If slavery were becoming unprofitable, what would happen to slave prices in the year’s leading up to the Civil War? Evidence shows that slavery was profitable, was getting more profitable, and was expected to continue to be profitable after the Civil War years.

45 What was slavery like—The Slave Family? Slave Owners as profit maximizing businessmen.  Not surprising result is that slave owners treated slaves like factory owners treated expensive machinery.  Thinking of slave owners as businessmen motivated by the profit motives “explains” many of the aspects of the slave system. The Slave Family  Legacy of Slavery arguments have been used to attempt to explain many aspects of current black family structure. The Great Society Programs and the welfare debate in the late 60's and early 70's. Greater prevalence of single parent families among black families explained by the structure of the slave family.  Because at birth slave infants had a positive present value it was in the economic self-interest of the slave owner to promote live births. Did this primarily by promoting the traditional family structure among slaves. The abolitionist depiction of slave breeders was false. Slaves live primarily in a normal nuclear family.  Between 1790 and 1860 both the free white and slave populations of the South grew at roughly the same rate. Similarity of Rates disposes of idea that slaves were bred at maximum rates.

46 What was slavery like—Living Conditions? Fogel and Engerman argue that slaves lived remarkably well.  Basic argument is that owners had a strong financial incentive to maintain the viability of the their financial investment.  Debate over conditions of slavery has been tainted by abolitionist literature. Abolitionists tried to portray conditions of slavery to elicit favorable response from northerners to abolish slave trade. Abolitionist propaganda tainted historical view of slavery. Basic Slave Conditions  Diet. Use census of large plantations, business records, and instructions to overseers. Take amount of food produced, subtract portion fed to animals, sold, etc. and assume residual used to feed slaves. Basic diet consisted of corn and pork and was well balanced and contained sufficient calories to sustain high levels of work. Basic slave ration contained calories a day and contained high levels of protein, iron, calcium, and vitamins-high enough to meet modern daily recommended requirements. Diet not that much different than that eaten by free whites.  Housing and clothing. The typical slave was housed and clothed simply but not badly. 5 adults lived in an 18x20 foot cabin, w/1 or 2 rooms, a plank floor, fireplace and shuttered windows Slave had more space per person that New York ’ s free poor in the late 19th century. They each received 4 sets of cotton shirts and pants or dresses and 2 pairs of leather shoes plus coats and blankets as needed.

47 Slave Conditions (2)  Medical Care, Life Expectancy, and Infant mortality Access to Medical Care was irrelevant to the well-being of antebellum Americans. environmental factors-water, diet, etc. explain differences in mortality and the record for slave was reasonably good. For slave women 6 out of 1000 pregnancies ended in death of mother-lower than for white southern women. 183 out of 1000 infants failed to reach 1 yr. old compared to 146 per 100 among white children Due to work during last trimester causing underweight children.  Punishment Whipping, public humiliation, and loss of privileges were the primary means of punishment. Jail reduced labor productivity. Whipping used w/discretion. over a two year period, 45% of slaves were never whipped and 19% were whipped once. The average number of whippings per hand was.7 per year.  Gifts and non-appropriated income as reward. Rewards used as an incentive for hard work.  Slaves received gifts or small plots of land to work as incentives for hard work.  Occupation as Reward. Occupation used as a reward for service. Slaves could escape work gangs by hard work and docility for a decade or more.

48 Rate of Exploitation The paradox of forced labor is that even though blacks were enslaved and had a portion of their wages expropriated by slaveowners, their material standard of living was higher than that of free white farmers.  Before Fogel and Engerman, the picture of life on the plantations was biased by abolitionists--depicted slaves living in marginal physical state and the life of slaves as typical to concentration camp inmates.  Optimal mix between positive and negative reinforcement- Not clear slave owners wanted to run plantation as a concentration camp- Might be possible to get greater levels of inducement out of slaves using a mix of positive and negative reinforcement. How much of the product of black labor was diverted by slave owners?  Exploitation defined as the percentage of a slaves competitive wage is expropriated by slave owner. Doesn ’ t include non material positive aspects of being free vs. a slave.  Fogel and Engerman define the rate of exploitation as the difference between the present value at birth of the value of the slave ’ s product and the value of goods and services provided by slave owner. Until age 9 the annual value of a slave ’ s output less than maintenance. From 9 on, the yearly value of slave ’ s output greater than maintenance but it takes 18 years for the loss to age 9 to be recouped. Rate of Exploitation is 12%-less than the modern income tax rate

49 The Paradox of Forced Labor Slaves actually experienced a larger monetary standard of living than free farmers.  Cotton plantations were extraordinarily productive.  The average cotton farm produced 29% more output than the average free farm in the North with the same inputs.  Slave owners expropriated 12% of a slave's income, but this left more goods than a typical free farmer in the North consumed. In essence, slaves and owners split extra output that derived from gang system of labor on cotton plantations. The Paradox of Forced labor is that in a capitalist system, in which personal liberty, strong private property rights, and the individual ’ s ability to deploy his productive inputs, e.g. labor, are bedrock principles, slave labor or coercion was used to produce a good (cotton) in a highly efficient manner.

50 What happened to blacks after Civil War? Good example of limits of historical research.  Nutrition literature unusual in the amount of inferences that the data allow.  Some historical issues may never be answered-example effect of segregated schools literature. Since there was no standardized testing, no way to correlate school expenditures and educational achievement.  For assessing the progress of blacks after the CW, the problem is that the agricultural census did not record the race of the farmer. Therefore, the only way to estimate income by race is to cross reference the population and agricultural census-a labor intensive process.  Early estimates of black income after emancipation. Roger Ransom and Richard Sutch-One Kind of Freedom 1960's hippies at Berkeley. Got a NSF grant and cross referenced the 1880 population and agricultural censuses and used the results to estimate black income before and after emancipation.

51 Computing the Value of Freedom Data problems.  While it seems an obvious question, historians had no good answer until economic historians arrived on the scene and even then it required an involved data gathering effort. Estimation of black income is complicated by the nature of the surviving data.  Difference between published census volumes and the manuscript census.  Each person and farm fills out return.  Census takers tabulate returns and print summary tables.  Information available depends upon what tabulators decided to add up.  Population census contains no information about income because no one really cared about making Black vs. White comparisons. Ransom and Sutch matched linked population return and agriculture return—Ransom and Sutch Dataset. Additional problems can be shown using Indifference Curve Analysis.

52 Measuring the Benefits to Freedom-An Indifference Curve Analysis Leisure Income 0 B A C After Expropriation I1I1 I2I2 Slavery Using the gang system, the slave owner forced blacks to work at very levels of effort (point C) and then expropriated a portion of the slave’s output (moving the slave from point C to B). At point C, the slave is consuming a non-optimal bundle of income and leisure. He would rather be at A—with less income and more leisure. Income at point B can be estimated using plantation and agricultural census records. I3I3

53 Measuring the Benefits to Freedom-An Indifference Curve Analysis (2) Leisure Income 0 B D After Expropriation I1I1 I2I2 Freedom After emancipation, the gang system was no longer viable. The opportunity cost of leisure was reduced (purple dotted line). The freed slave will reduce his work effort moving to point D. At point D, even though money income is lower, the slave is better off (higher indifference curve) because he has increased the amount of leisure he is consuming. It is also possible that money income would increase after emancipation but the value of freedom, measured by the increase in money income, would still underestimate the value of being freed. To truly measure the value of freedom, must account for the value of increased leisure of freed blacks. I3I3

54 Computing the Value of Freedom (2) Can estimate income by taking value of output and subtracting costs of production and then dividing by the number of people on farm. First problem, census gives information about the value of output for the farm and the amount of various inputs used. Blacks who were not owners didn ’ t keep all the profits of the farm.  Must take into account 3 different arrangements depending on whether blacks owned land, capital, or just provided labor.  owners, sharecroppers, and sharerenters. Must adjust income estimates for the effect of increased leisure.  Main assumption made by Ransom and Sutch is measuring the value of freedom on the average wage rather than the marginal wage.  Issue of which is more accurate, a direct measure of what people could earn if they worked more or an imputed measure in which various assumptions had to be made.

55 The Value of Freedom  Free blacks experienced a large annual increase in their material standard of living.  Since emancipation was a once in a lifetime event, it is appropriate to measure effects over lifetime.  In PV terms, blacks received a lump sum payment of 26 to 30 times average income-- about $500,000 in today’s dollars.  Argument that blacks didn’t benefit from freedom is wrong i.e. Civil War wasn’t a waste of time. Emancipation did significantly increase black welfare.

56 What Happened to Blacks over Time? What was black standard of living compared to whites?  Ransom and Sutch only compute black income in the South.  Ransom and Sutch conveniently don’t measure white income in the South or compare it income in the rest of the country. Can use the same methodology to measure white income in After 1880 there is a problem.  Problem is that there is no good income data by race outside of southern agriculture.  Economics historians have estimated regional GNP numbers but not broken down by race.  Ransom and Sutch only linked data within the South so there is no database which identifies race of person.  First reliable income data based on race begin in  Problem with censuses—no manuscripts only the published volumes of census. Ng and Virts-Compute income for  The only year for which data is available in the published volumes of census.

57 Methodology (Ng and Virts) Equations 1, 2, and 3 show how income is measured for each class of tenancy. If the estimate for each type of tenancy is weighted by the relevancy of they type of tenancy, and estimate of average income per person can be computed. The numbers are then adjusted for the age distribution of the family. Black families had more children so per capita income is too low.

58 Methodology (2) Equation 5-southern income from southern farm income. Equation 7-infers white southern income from black income-know personal income in the South and black income. Equation 8-infers national income from southern income-assumes that black regional income is proportional to white and black income. Equation 9-infers white national income from black income and total national income. Adjust the whole mess for the age distribution of the population and you get the following table.

59 Immediately following emancipation, blacks were concentrated in the rural South. In the area in which they lived, the black worker earned 89% of the income that a white worker earned. Differences in labor quality probable explained the differential. Nationally, blacks income was 34% of white income. The difference in black white income was due to the concentration of blacks in the rural south. Effect of urban/rural. Regional differences in per capita income. Historical accident, not discrimination, explained lower black income immediately following the Civil War. Theories of black victimization?

60 The Cutting Edge. In unpublished research, Ng and Virts have estimated black and white income for  Use the published volumes of the 1900 census.  Historical accident that enough information was tabulated for the published volumes of the 1900 census.  The required information is not available for the 1910, 1920, or 1930 censuses. Period , was the period in which there were many adverse historical developments for blacks.  The segregated public school system was created.  Blacks were disenfranchised.  Black Codes were instituted. What effect did these historical developments have on black welfare?

61 In the period from 1880 to 1900, blacks increased their incomes in absolute terms. Relative to whites, blacks in the last portion of the 19 th century did not match the progress of whites. The adverse historical events in the South did have a negative effect on blacks.

62 What happened to blacks after emancipation-a summary Emancipation had an enormous immediate positive effect on black material welfare.  Part of the increase in material welfare was enjoyed by blacks as in an increase in consumption of material goods (more income).  Just as important as the increase in material income was the increased consumption of leisure.  Using the prevailing wage rate to value leisure, the increased consumption of leisure was more important than the increased material income following emancipation.  Equivalent to a $500,000 lump sum payment in today’s dollars. Immediately following emancipation, blacks achieved a degree of equity with southern whites.  In the labor markets in which the majority of blacks participated, they earned incomes comparable with whites. Any differences in income were probably due to skill differences resulting from recent emancipation.  The black/white income ratio in 1880 of.37 is attributable: To blacks being emancipated in a poor region-the South. Being emancipated in rural rather than urban areas. In the period from , the legal and social environment of blacks deteriorated.  Segregated public schools, Jim Crow Laws, disenfranchisement, etc.  Without reliable income estimates, the question of whether these adverse historical developments adversely affected black welfare have been unanswered.  During this period, black continued to improve their material condition but not as fast as whites.

63 Table 1: Mean Male Income by Race (1984 dollars) By 1940, black income had increased from.37 to.43 of white income. Since 1940 the income of black men has improved absolutely and also relative to whites (2.2% vs. 3.5% per year). The post World War II period was one of advance by blacks.

64 Table 2: Black Male Wages as a Percent of White Male Wages, The table shows the changes in relative wages by work experience.  Reading the table: A person in 1940 with 5 yrs. Experience earned 46.7% of a white person with the same experience.  What happened to this person as he continued to work?  You can follow an individual’s life by moving diagonally along the table.

65 Table 2: Black Male Wages as a Percent of White Male Wages, It is commonly posited that only younger blacks benefited from the improvement in black incomes that occurred in the post World War II era.  What do the numbers in the chart suggest?  As black workers progress in their careers, their relative wages increased.  Young as well as older blacks benefited from the general improvement in black relative wages.

66 Table 2: Black Male Wages as a Percent of White Male Wages, From 1940 to 1980, black wages increased 52% faster than whites. Largest improvement occurred during the 1940's, slowed during the 1950's and increase during the 1960's and 1970's. Common story of black wage stagnation is not correct. Evidence that Civil Rights Movement and increased Black Voter Participation was not responsible for increased black income because improvement occurred before Civil Rights Movement.

67 Table 3: Extent of Overlap Between Black and White Income Distributions Note: The way to read the chart is as follows. In 1980, only 10% of black men had an income that exceed the income of a white man whose income was in the top 25% of the income distribution. In 1980, 29% of black men had an income that exceeded the median income of white men.

68 Table 3: Extent of Overlap Between Black and White Income Distributions In 1940, the U.S. was truly a nation racially divided. Black and white men were truly divided into two separate and unequal societies and the upper segments of society were an exclusive white male club. Because people associate primarily with those in the same socio-economic groups, white elites had little contact with blacks. Most of the black/white interaction occurred at the lower income levels.

69 Table 3: Extent of Overlap Between Black and White Income Distributions 70% of white men earned more than the top 25% of blacks in In 1940, only 1% of black men had an income greater than the Top Quarter of white men. By 1980, the income distributions had converged greatly. Black penetration into the economic elite and glass ceiling arguments. Black Middle Class-29% of black men earned more than the median white.

70 Table 4: Men in the Middle Class Table shows the percentage of blacks and whites above, below and within the middle class. Table 4 shows:  the persistence of black poverty,  growth of the Black middle class  the recent emergence of a non-negligible black upper class.

71 Table 4: Men in the Middle Class From 1940 to 1980, the bulk of Blacks have moved from the lower to the middle class. For the first time in history, a sizable number of black men are better off than white middle class.

72 Table 5: Percentage Increase in Black Annual Income Compared with Whites at Selected Percentiles Increase in income was fairly broad based with roughly even changes across experience and income levels except for those in the very bottom of the income distribution. Do those in the bottom of the income distribution have some type of developmental or behavioral problem which limits income?

73 Table 6: Percentage Growth in Black-White Male Ratios of Weekly Wages Blacks experienced the most convergence in wages between 1940 and 1950

74 Table 7: Percentage Growth in Black-White Weekly Wage Ratios by Education Blacks with more education experienced a greater improvement on their wages relative to whites.

75 Data Sources

76 Value of Freedom

77 How Did Blacks Fare Compared to Whites-Late 19 th Century

78 How Did Blacks Fare Compared to Whites-Early 20 th Century

79 The Improvement in Black Relative Incomes What was the role the Civil Rights Movement, election reform, affirmative action and desegregation?  Was the causality: Government legislation caused the improvement in black welfare. Improvement in black welfare caused the government legislation. Factors other than government action caused the improvement in black welfare. What was the nature of the improvement in black incomes?  Was the improvement broad based or was it limited to specific segments of the black population? Age, education, and experience. What can income distribution data reveal about the nature of race relations in the U.S?

80 Civil Rights, Government Action, and Black Welfare. Timing argument similar to the used by McKeon in the nutrition debate. School desegregation, voting rights reform, affirmative action, and civil rights legislation occurred after much of the improvement in relative black welfare.  Therefore, these could not be the sole or primary cause of black relative improvement. Other factors must be identified.

81 The Nature of the Improvement in Black Relative Incomes. The increase in incomes affected:  Young and old blacks.  Experienced and inexperienced blacks.  Educated and uneducated blacks.  Rich and poor blacks  And led to the rise of a large black middle class and a significant black upper class for the first time.

82 Income Distributions and the Nature of Race Relations In 1940, there was little overlap between the black and white income distributions. The majority of blacks were concentrated at what would be the lower end of the white income distribution. Since people primarily associate with those from the same socio-economic class there was little contact between blacks and whites in This effect was especially pronounced at the higher income levels.

83 Income Distributions and the Nature of Race Relations By 1960, 49% of the improvement in black relative income had already occurred (Table 1). For the first time, middle, upper middle, and upper class whites had significant contact with blacks. Despite the improvement, there was still little contact among upper class whites and blacks.

84 Income Distributions and the Nature of Race Relations By 1980, there had developed a significant black middle and upper class. For the first time, upper class whites had significant contact with upper class blacks.

85 Slavery and the Civil War- A Study Guide. Slave Trade  Mortality and the slaver as a profit maximizing businessman.  Multi-Culturalism. Comparing and contrasting U.S. slavery vs. slavery in the rest of the new world.  Cotton vs. Sugar. Slave Rebellions and the nature of the slave system. Epidemiological differences.  Natural increase vs. imports. Effect on black culture. The nature of the slave system and black culture. How were slaves treated and what was it like to be a slave-economic factors? Diet, housing, shelter, occupational advance, etc. Slave labor and the efficiency of producing cotton. Material condition of slaves vs. free farmers. The paradox of forced labor. Age/price profiles—what can we learn? Slave owners as profit maximizing businessmen.  Ramsdel and Phillips. The rise of the U.S. as “The Great Slave Power.” How did it happen-the confluence of factors?

86 Slavery and the Civil War- A Study Guide (2) Emancipation.  Emancipation schemes outside the U.S.  Why the U.S. was different? Civil War  Politics---why no political solution? Constitutional limits Who benefited from the end of slavery and “The Great Moral Crusade.” Abolitionists, morality, and narrowly defined self-interest.  Viability question-would slavery have ended without the Civil War? Evidence?  Cost-human and financial. Why so lethal? Technology, tactics, geography and culture. Expectations and the rationality of fighting.  Was the Civil War an efficient method of ending slavery.  The ever changing history of the Civil War. Abolitionists, southern historians, blacks studies departments, liberals, and economic historians.

87 Slavery and the Civil War- A Study Guide (3) Freedom and Emancipation.  The Value of Freedom. Did emancipation mean much to blacks?  What happened to blacks in the late 19 th century. Did changes in the political and legal environment materially effect blacks?  What happened to blacks in the 20 th century.


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