Murphy Stuff
==> Ep. 51 of the Bob Murphy Show features Hannah Cox explaining why conservatives should oppose the death penalty.
==> I take on Joe Weisenthal on negative interest rates.
==> I argue that, contrary to some leftist progressives, slavery was nota boon for American capitalism. Excerpts:
There is no doubt that a healthy adult slave in a region with adequate natural resources can produce more than a subsistence amount of output, allowing for the owner to keep the slave alive and keep the surplus for himself, living up to the Marxist vision of how labor markets work in general. So if the question is, “Was US output higher with millions of productive slaves working, than it would be if those slaves suddenly disappeared?” then the answer is, “Yes, of course, slavery was ‘productive’ in this sense.”
But that’s not really the question. The question is, if all of the plantation owners in (say) the year 1850 had suddenly freed all of their slaves and turned them into free laborers, what would that have done to the course of US economic development? Is it really true that this change would have made the country as a whole poorer?
and:
Slavery was a monstrously unfair and immoral institution, but it was also inefficient, compared to a system based on free labor. Although I understand the rhetorical context of these arguments in regards to reparations and pride in U.S. history, it’s very dangerous to be making the case that enslaving others is the path to national greatness.
Plantation owners had the option to hire free (white) people to work. Why did some of them choose to buy slaves instead?
That’s an interesting question but just to make sure you (or onlookers) don’t conclude too much from that: By the same token, some business owners in the slave states had the option of buying slaves but they chose to hire free workers instead. Why?
Maybe insufficient capital?
Relating to my point below, without slaves there may well not have been enough workers available.
” By the same token, some business owners in the slave states had the option of buying slaves but they chose to hire free workers instead. ”
That’s true. I can only conclude that it was more economical for them to hire free workers. Just like it (apparently) was more economical for some plantation owners to buy slaves.
This seems to run against your thesis.
No it does not. A simple example shows why.
Imagine 100 people on an island. The islands only crop is ko. They can all produce in a year 100 ko to export. Now 20 of the islanders decide they can get rich if they enslave the other 80. So now 20 overseers and 80 slaves. But how much ko? Are the overseers still producing 100 ko each? Nope, since they need to enforce slavery. So say they directly produce 60 ko each.
What about the slaves? I bet they produce less too. That is why slaves are proverbially “lazy”. Say they produce 90 ko.
Less ko now. So less wealth socially. But the slave owners are richer than before.
I don’t see the point of this question, the initial post was about how individual slave owners could extract rents from slaves, making them more profitable for the owner, but not more productive on net from a broader perspective.
A free farmer who owns a family farm and grows partly for subsistence and partly for the market will optimize heavily for labour efficiency (he has to do the work) and probably won’t be interested in growing a crop like cotton. A big landowner who gets access to very cheap labour doesn’t need to worry so much about efficiency in that sense and will optimize only for the highest cash value of the crop.
After the civil war, there was a rush of new labour into other industries like construction for example … anywhere a person with minimal education but strong hands could make a living.
As a consequence I’d say it’s very difficult to estimate what the USA would have been like … I would say less cotton would have been produced, but more of other crops and different industries. For example, free labourers will spend their surplus on themselves … probably want a better house, better furniture, more varied diet, entertainment, etc. That means the economy would have oriented itself more around those things. Whether that’s “good for the nation” only becomes meaningful if you can find a way to ask “the nation” what it wants.
“A big landowner who gets access to very cheap labour”
Slave labor wasn’t cheap. In nominal terms, it was up to ten times more expensive than labor in British India.
Cotton didn’t become a major cash crop until after the advent of multiple labor saving devices.
I pretty much agreed with everything in your slavery article but did have this quibble:
You say ‘a popular talking point is that “by the dawn of the Civil War, the Mississippi River Valley had more millionaires per capita than any other region.” Now the reason they have to put “per capita” in there, is that the South presumably did not have more millionaires than the North.’
Why is ‘per capita’ a bad measure here ? I’m sure that India has more millionaires today than Singapore, but the fact that Singapore has more millionaires per capita is a good indicator that Singapore is a more successful economy..
Hmm interesting point Transformer. I’ll have to think about it. I was thinking that there was more immigration to the north (because of their open labor markets) and that would hold down the average.
I have not read the article yet – i will do so, but I wonder if that “per capita” includes slaves? It might make a difference. Maybe I shouldn’t comment before reading it.
Ten years of Harold’s comments, explained.
Has it really been 10 years? Goodness, how time flies! Anyway, explanations below as I make considered comments after reading the article. Meanwhile my question goes unanswered.
Don’t know if previous comment will reappear, but I did ask whether the per capita included slaves?
“But that’s not really the question. The question is, if all of the plantation owners in (say) the year 1850 had suddenly freed all of their slaves and turned them into free laborers, what would that have done to the course of US economic development?”
Why is that the question? After all, without the institution of slavery and the forced immigration there would not have been those slaves to set free to become workers.
Later on “We need to ask: Would the output of plantations have increased more had they been based on free labor?” Yes, but free labor without the kidnap, surely?.
Shouldn’t the question be “had there been no slavery…”
I agree that the question you ask is an important one, but perhaps not the question the answer to which settles the debate about how slavery affected the American economy.
I’m not sure if I’m disagreeing with or just not getting the following:
‘What’s going on here, of course, is that even though a physical piece of wealth might require physical maintenance (which costs money), the market value of the object can nonetheless rise over time. And indeed, in an economy where the rate of interest is positive (let’s put aside for the moment what makes it positive), the current or spot price of the piece of wealth would reflect investor requirements for long-run appreciation.’
Doesn’t rent come into play here and make it viable to own physical wealth even without appreciation ?
To use a similar example to the post: I am thinking of buying a house for $100,000 that comes with some expenses and a bit of risk about future value (and other unexpected stuff). The market rate of interest is 5% and I decide if I can buy it and can most likely rent it out for $10,000 a year then that 10% gross return is enough to persuade me this is the best use of my money given expected expenses and risk. This would be the case even if I was not actually expecting appreciation (because I think the chances of appreciation and depreciation are equal). If I did expect appreciation then I would be prepared to pay more for the property.
So I am not getting the ‘investor requirements for long-run appreciation’ part of the quote from your post above.
(note: If I am not planning to rent the house but live in it myself then nothing much changes – in utility terms its just as if I’m renting it to myself)/
To put it more succinctly:
Your post appears to answer the question:
‘Did Joe Weisenthal just “prove” that everyone who invests in real estate always loses money on the deal?’
With the answer:
‘ no, because of appreciation’.
and I am querying where rent come in to the equation.
To continue to flog a dead horse:
It strikes me that most physical embodiments of wealth (unlike houses and rare paintings) tend to both need maintenance and depreciate over time. The reason people hold them is because the psychic benefit of doing so (either from the direct utility of using them or the indirect utility of rent obtained) exceeds these costs.
According to https://eml.berkeley.edu/~webfac/cromer/e211_f12/LindertWilliamson.pdf
Southern per capita incomes in 1860 were 70-75% of coastal Northern ones, but were on par with Midwestern ones.
The end of slavery had almost no impact on the Northern economy, but absolutely devastated the Southern one. Southern per capita incomes in 1880 were lower than in 1840 (and 1774), and were far below Midwestern ones. The economic hellscape the fire-eaters predicted would happen to the South with the end of slavery actually happened. Given this, one can reasonably say slavery was an economic benefit for the South while it lasted. Slaves definitely worked longer hours than free Blacks postwar.
From the paper “Inequality was much lower in 1774 and 1800, especially among free whites, than in England”
My first thought was I guess if you exclude the poorest laborors (the slaves) from the statistics that is likely to be the case.
Looking at the paper I see that if slaves were included, the inequality was still much lower than pretty much everywhere else. All levels of Americans earned more than their European counterparts except the top 1% – and that included the slaves (in purely financial terms). By 1860 that had changed and the top 1% in America had increased their share significantly, whilst the poorest got a smaller proportion.
E. Harding wrote:
The end of slavery had almost no impact on the Northern economy, but absolutely devastated the Southern one. Southern per capita incomes in 1880 were lower than in 1840 (and 1774), and were far below Midwestern ones. The economic hellscape the fire-eaters predicted would happen to the South with the end of slavery actually happened. Given this, one can reasonably say slavery was an economic benefit for the South while it lasted. Slaves definitely worked longer hours than free Blacks postwar.
There was something else that happened to the South between 1840 and 1880 which might also explain why their income was lower, besides the ending of slavery per se.
Bob, why are my comments being eaten?
Some if mine have vanished also.
I don’t know, sometimes the blog holds everybody up until I manually approve. It wasn’t just you.
Coprophagy.
I was about to look up the Latin phrase nota boon</i? when I realised. I think it was the italics that threw me.
Darn it – messed up the HTML tags again! Chipolata fingers. That ? should be a >. The italics got me again!
I have often seen it argued that there cannot be sexism (or racism, or whatever) in hiring, because firms that hired without discrimination would out-compete firms that were discriminatory in their hiring. The market, we are told, if left to itself must eliminate inefficient practices.
Here we have a discussion that slavery was an inefficient method of production, yet it lasted 300 years and was not ended by the market but by a bloody war.
The broad story is that if we have to wait more than 300 years for the market to correct things, then we really do need to hurry it along a bit.
Whilst these two positions seem on the surface to be at odds, there may be differences that explain the apparent contradiction.
One would be that the market was not left to itself. This would mean, I think, that slavery was mandated or encouraged and free hiring was forbidden or discouraged by law. I don’t think this was the case.
Another possible argument is that slavery was economically efficient for many years, but the system was not in the long run. Maybe it was slow to adapt or something. This argument may justify that markets would have eventually removed slavery, but it undermines the “reparations are not justified” argument that slavery actually made everyone poorer.
So one question is, “if slavery was inefficient, how did it survive? ”
Bob asks a different question, which is essentially “was slavery inefficient by (say) 1850?”
Perhaps it is not different question, but the same question with a different date. To paraphrase Bob, the question is, if all of the plantation owners in (say) the year 1650 had freed all of their slaves and turned them into free laborers, what would that have done to the course of US economic development?
I suspect there would have been a labor shortage, which would have held back development. But what are your thoughts?
Harold wrote:
One would be that the market was not left to itself. This would mean, I think, that slavery was mandated or encouraged and free hiring was forbidden or discouraged by law. I don’t think this was the case.
Yes Harold, that is exactly the argument I would make. I’m going to be doing more on this in the next month or so, so I’ll save my ink till then.
I eagerly await!
Actually, slavery was quite explicitly encouraged in slave states. Free blacks were attacked, laws were proposed to enslave free blacks. The fugitive slave laws created a presumption of enslavement for blacks even in free states. The law was used to enforce slavery.
Was it used to prevent hiring free workers? Maybe we should wait until out host puts his thoughts down.
Also, this rather strengthens the “reparations” case, whether or not it was economically efficient.
Bob,
On the question of the death penalty, I highly recommend this book which deals with both the moral issues and the social science:
https://www.amazon.com/Man-Shall-His-Blood-Shed/dp/1621641260
Ed Feser, who also happens to be my favorite philosopher, has addressed the issue of capital punishment many times on his blog:
https://edwardfeser.blogspot.com/search?q=capital+punishment
Spend some time with his arguments — he will turn you into a supporter 🙂
I tried Fesser but he seems obsessed by what Catholic teaching says rather then the wider issues.
Market forces might cause an inefficient entrepreneur to lose his capital to a more efficient entrepreneur. This is generally considered an efficient outcome. But this efficiency gain can’t be achieved if the capital is a living human body? Why not? Think of someone you’ve met or heard of whose “efficiency” would be greatly improved if he were involuntarily committed into the care of a benevolent life coach.
I certainly don’t want to argue that involuntary servitude is generally efficient. But there must certainly be some special cases in which you can realize at least a short-term efficiency boost. It seems to me that there is a large minority of people, from all identity groups, that could stand to benefit from being involuntarily committed to some purpose. Their freedom to wallow in nihilism, hedonism, consumerism, and poverty is a source of inefficiency, is it not?
Because it must be said, I absolutely condemn slavery on moral grounds. Nothing I’ve written above should be taken as a moral justification for involuntary servitude. But I don’t believe that the “inefficiency” argument holds water.
How do we determine efficiency? My understanding in very broad terms is that it is the result you get if everyone is allowed/able to exchange freely. If there are no frictions this will lead to a Pareto efficiency, where nobody can be made better off without making someone worse off, each according to their own preferences (not some external measure of value).
With slavery we have a problem, because slaves are not able to trade freely.
The idea of Pareto efficiency is hypothetical, since there are always frictions and people can never exchange completely freely. To get around this some talk instead of Kaldor Hicks efficiency, where the trades that can not take place in practice are assumed and the results extrapolated to see if more people are better off than worse off. I know some here reject this idea of “transferable utility” but it is a widely used concept. In the slaves case we would need to demonstrate that the slaves would in principle have accepted some payment the non-slaves could have made out of the extra benefits they obtained from slavery. I think that is a difficult case to make.
With this measure we need to account for the losses to the slaves of the removal of their freedom. It is possible that overall we could end up with a Kaldor Hicks type efficiency but I am not sure how we would determine the economic cost to the slaves. I am sure some people must have attempted to do this.