Showing papers in "The Journal of Economic History in 1990"

Nuclear Power Reactors: A Study in Technological Lock-in

Abstract: Recent theory has predicted that if competing technologies operate under dynamic increasing returns, one, possibly inferior, technology will dominate the market. The history of nuclear power technology is used to illustrate these results. Light water is considered inferior to other technologies, yet it dominates the market for power reactors. This is largely due to the early adoption and heavy development by the U.S. Navy of light water for submarine propulsion. When a market for civilian power emerged, light water had a large head start, and by the time other technologies were ready to enter the market, light water was entrenched.

Enclosures, Common Rights, and Women: The Proletarianization of Families in the Late Eighteenth and Early Nineteenth Centuries

Abstract: This article argues against the mainstream view that eighteenth-century common rights were of little significance to working people. Markets in common rights and in their products provide an index of value, and when neither common rights nor derived products were bought and sold, values are imputed from the market prices of similar goods. Since women and children were the primary exploiters of common rights, their loss led to changes in women's economic position within the family and more generally to increased dependence of whole families on wages and wage earners.

Is Deposit Insurance Necessary? A Historical Perspective

Abstract: The motivation and structure of various banking insurance experiments in U.S. history are analyzed, along with their political alternative, branch banks. In both the antebellum period and in the 1920s, insurance systems that relied on self-regulation, made credible by mutual liability, were successful, while compulsory state systems were not. Branch banking increased stability and resiliency to shocks.

The Democratization of Invention During Early Industrialization: Evidence from the United States, 1790–1846

Abstract: The skills and knowledge necessary for patentable invention during early American industrialization were widely dispersed among the general population. This endowment permitted a rather elastic supply of patentable ideas over the relevant range as the expansion of markets induced more individuals to invent and innovate.Although a broadening of the ranks of patentees was primarily responsible for the initial acceleration of patenting, the importance of patentees with greater long-term investments in inventive activity increased during later stages of development.

The Evolution of the Gold Standard in England

Abstract: In 1816 England officially abandoned bimetallism and made silver coins into tokens that were only limited legal tender. Earlier monetary authorities had lacked the ability to manage a subsidiary coinage, a necessary complement to the monometallic gold standard. A successful token coinage must be both costly to counterfeit and credibly backed to ensure that the tokens do not depreciate to their intrinsic value. These problems were solved in the nineteenth century through the introduction of steam-driven stamping presses and with the assistance of the Bank of England.

A New Monthly Index of Industrial Production, 1884–1940

Abstract: The article derives a new monthly index of industrial production for the United States for 1884 to 1940. This index improves upon existing measures of industrial production by excluding indirect proxies for industrial activity, using only component series that are consistent over time, and not making ad hoc adjustments to the data. Analysis of the new index shows that it has more within-year volatility than conventional indexes, has relatively unimportant seasonal fluctuations, and has cyclical turning points that are grossly similar to but subtly different from existing series.

Agency Problems in Early Chartered Companies: The Case of the Hudson’s Bay Company

Abstract: The problem of controlling overseas managers confronts all multilocational firms. Historians have argued that because of the extreme time lags in communication, chartered companies were unable to control managerial behavior. We argue that not only did the Hudson’s Bay Company understand the agency problem but also put into operation strategies designed to attenuate opportunistic behavior. The company used employment contracts and control systems and established a social structure compatible with the company’s aims.

The Revolution of Ideas: Widespread Patenting and Invention During the English Industrial Revolution

Abstract: Sectors of the English economy recognized as technological leaders have records of accelerated patent activity soon after 1760. But the patent record also reveals considerable inventive activity during the same period in industries not normally associated with advancing technology. It is therefore unlikely that there was a “leading technological sector.” The widespread increase in patenting is consistent with macroeconomic causes of accelerated invention.

Exchange Rates and Economic Recovery in the 1930s: An Extension to Lation America

Abstract: In a study of ten European countries during the 1930s Barry Eichengreen and Jeffrey Sachs show that devaluation benefited the initiating countries and that there can be no presumption that depreciation was beggar-thy-neighbor.' I apply their methodology to ten Latin American countries. Examining the behavior of the Latin American economies is important in several respects: these countries were hit first by and reacted earlier to the effects of the Depression; they were part of the "periphery" and their policies did not directly affect the behavior of the "center"; and their experience during the 1930s led them to select a subsequent inward-oriented path of development, based on import substitution.2 This model of development built upon a particular set of social and economic structures that were seen as shaping the world economic order, notably a center and a periphery with different structures of production. Unlike those of the periphery, the industrialized economies of the center are self-sustained; specifically, the periphery is constrained by an export sector confined to a very small range of goods and offering only limited backward and forward linkages with the rest of the economy.3 This note shows that Latin America reacted in the same way to depreciation as did Europe, and so offers evidence against the argument that Latin American economies were structurally constrained during this period.

One Market or Many? Labor Market Integration in the Late Nineteenth-Century United States

Abstract: This article examines the geographic integration of U.S. labor markets from 1870 to 1898, using previously unexploited wage and price data for 23 occupations in 12 major cities. In contrast to the increasing nationalization found in other markets at that time, the labor market was characterized by large and persistent real wage differentials both within and between regions, leaving little doubt that late nineteenth-century labor markets remained far from completely integrated. The differentials, however, owed as much to substantial variations in labor demand growth as to the lack of labor market integration.

Getting a Foot in the Door: “Learning,” State Dependence, and the Racial Integration of Firms

Abstract: Economists have emphasized supply-side learning when explaining long-term trends in racial income differences. This article demonstrates that learning also occurred on the demand side. Estimation of a state-dependence model of the sequence of racial employment outcomes of firms in Cincinnati, Ohio, during World War I shows that the introduction of black workers into a previously all-white firm generated new experiences within the firm, altering its future racial employment decisions.This suggests that more research should be done on how firms and labor markets processed information about workers and how that influenced worker opportunities.

Labor Mobility and Lengthy Jobs in Nineteenth-Century America

Abstract: Extensive amounts of geographic mobility and high rates of labor turnover before World War I gave rise to the notion that the industrial labor force was “casual” and “impermanent.” But data from firms' payrolls and from nineteenth-century surveys conducted by state labor statistics bureaus show that male workers averaged about four years of experience in their current jobs. Data from an 1892 survey of San Francisco workers show that the average non-union male could expect to remain with his current employer almost 13 years.

The Evolution of Private Property in Nineteenth-Century Hawaii

Abstract: Population pressure has been identified as a major force behind the transition from traditional property rights in land to exclusive, transferable property rights. This article examines the case of Hawaii where the transition to private property in land occurred while its population was rapidly declining. That transition was driven by new market opportunities and considerations of public finance.The shift in comparative advantage to sugar production increased the rents associated with private land rights, while declining tax revenues prompted the king and his government to pursue property rights reform to gain additional revenues.

Bull and Bear Markets in the Twentieth Century

Abstract: The bull and bear markets of this century have suggested that large stock market swings reflect irrational “fads and fashions.” We argue instead that investors perceived shifts in the long-run rate of future growth and that stock prices are sufficiently sensitive to expectations about the future that these perceived shifts plausibly generated the swings of the twentieth century. We document that analysts often viewed as “smart money” assessed fundamentals, based on their perceptions of future economic growth, in a way that tracked decade-to-decade swings closely.

Fifty Years of Coal-mining Productivity: The Record of the British Coal Industry before 1939

Abstract: A downward trend in British coal-mining productivity was reversed between the world wars. Declining productivity before 1914 was accompanied by wide regional differences, especially at the coalface. Scotland attained the best overall. productivity, while coalface productivity was highest in Durham and Northumberland. Regional differences narrowed by the 1920s but re-emerged in the 1930s, as mines in the North Midlands outpaced the productivity gains made elsewhere. Only a multifaceted interpretation can explain these distinctive patterns—over time, between regions, and at different stages of the coal-mining operation.

The Condition of England and the Standard of Living: Cotton Textiles in the Northwest, 1806–1850

Abstract: This article examines the workers' standard of living in the cotton textile industry of Northwest England from 1806 to 1850. Hedonic earnings regressions using 1835 data suggest that power-loom weavers required substantial compensation for the high rents and poor sanitation of urban locations. Adjusting earnings in the factory sector for the impact of urbanization cuts growth in living standards by 10 percent, or up to one-quarter of gains realized by 1850. Inclusion of those employed in the handloom sector implies that any improvements in the living standards of all workers in the industry appeared only during the 1840s.

Socialism and Wages in the Recovery from the Great Depression in the United States and Germany

Abstract: The sustained unemployment in the United States during the recovery from the Great Depression has proved difficult to explain, as has the rapid elimination of unemployment in Germany. I argue that employment in the United States was restricted by high wages, which government policy raised above the level of efficiency wages. Socialist control and military expansion by the Nazis reduced unemployment, but also held down consumption.

The Development of Irrigation in Provence 1700-1860: The French Revolution and Economic Growth

Abstract: Quantitative and qualitative evidence suggest that the returns to irrigation in France were similar during the eighteenth and nineteenth centuries. The Old Regime failed to develop irrigation because of fragmented political authority over rights of eminent domain. Since many groups could hold projects up, transaction costs increased dramatically. Reforms enacted during the French Revolution reduced the costs of securing rights of eminent domain.

Politics, Popery, and Property: A Comment on North and Weingast

Abstract: In a recent article Douglass North and Barry Weingast offered an intriguing interpretation of political and economic institutional change in seventeenth-century England.' Their central point is that the institutional arrangements that constrain government action have important implications for individual property rights and for the development of markets. They illustrate this argument using the example of constitutional change during the Glorious Revolution of 1688 and the subsequent development of public and private capital markets in England. I wish to discuss certain of the limitations to the North-Weingast argument. North and Weingast assert that the development of markets is heavily influenced by the extent to which rulers abide by the rules that govern economic exchange.2 Economic growth is reduced if rulers can unilaterally alter property rights whenever it suits them. Growth is enhanced if property rights are secure. Political institutions determine the extent to which rulers can revise property rights and hence also determine the trajectory of economic growth. They do this by structuring the incentives that face a ruler. Does a sovereign have an incentive to renege on his or her obligations, or is it in the sovereign's interest to live up to them? In the former situation, property rights will likely be violated. In the latter, they are secure. North and Weingast apply this argument to the case of seventeenth-century England. They argue that political institutions changed during the Glorious Revolution in such a way as to alter fundamentally the incentives faced by English monarchs. They pay particular attention to capital markets and to public indebtedness since "capital markets are especially sensitive to the security of property rights."3 Capital markets serve as a kind of litmus test. Before 1688 Stuart monarchs were frequently tempted to alter the terms of loans unilaterally, to grant monopolies, and to impose new taxes in order to solve their financial problems.4 This demonstrated their willingness to alter property rights in their favor. After 1688 constitutional changes shifted the position of the Crown relative to Parliament in such a way as to reduce the incentive to alter property rights. Parliamentary supremacy was established, Parliament gained a central role in public finances, various prerogative powers were eliminated or curtailed, and the judiciary gained its independence from the Crown.5 The wealth holders represented by Parliament gained greater control over the government, enhancing the security of their property rights. Public creditors were now assured that the terms of their loans would be honored. The result was a tremendous development in the system of public finance, with more money being borrowed at lower rates of interest. North and Weingast summarize the develop-

Winning the Eight-Hour Day, 1909–1919

Abstract: The American workers' quest for an eight-hour day finally came to an end around 1919. I argue that the most important factors behind the rapid decline in manufacturing hours in the decade before 1919 include the rapid expansion of the economy, which increased wages and drew new participants into the manufacturing sector; the reduction of immigration during the war; the growth in organized labor's strength; federal and state legislation that mandated reduced work weeks; and the electrification of the manufacturing sector.

Interest Rates in the Civil War South

Abstract: Interest rates in the Civil War South were quite stable and even declined a bit during the war. In this article we explain the mechanism that produced this puzzling result. The existence of a fixed-rate call certificate redeemable at par anchored interest rates expressed in terms of Confederate dollars. When expressed in terms of gold, they were volatile, high, and reflected war events.

The Effect of the Bubble Act on the Market for Joint Stock Shares

Abstract: In 1720 the Bubble Act was passed in the English Parliament.' There is a commonly held view that the Bubble Act was passed either as a result of the collapse of the bull market (the bursting of the speculative "bubble"), or as a result of the abuses to investors caused by the speculative frenzy.2 While these explanations have surface plausibility, they are inconsistent with the actual timing of the Act. The Act was passed June 11, 1720; the "bubble" burst in September of that year. Indeed, the act may have played a role in causing the market collapse.3 If the Act was not intended to remedy excesses which led to a crash, why was it passed? We believe passage of the Bubble Act was a consequence of changes in the business environment during the early eighteenth century. As non-corporations began to assume many of the rights previously enjoyed only by chartered corporations, the ability of governmental authorities to raise revenue through the issuance of charters diminished. The Bubble Act was specifically intended to prevent non-chartered firms from using the formal market, and it succeeded in doing this. The explanation also accounts for the observation of Philip Mirowski regarding activity in the market for joint-stock shares.4 Mirowski finds that well-organized capital markets were already in existence at the outset of the eighteenth century, as were their institutional structures, including property transfer rules, widely dispersed price information, and professional arbitrageurs. Activity on these markets appears to have declined throughout the century. Some existing firms ceased using the formal share market, and the shares of few, if any, firms commenced trading there. Mirowski uses his findings to cast doubt upon what he considers a central contention in neoclassical economic history, usefully expressed as follows. A market mechanism is the most efficient way of allocating resources and processing information. Hence, in the absence of legal constraints that prevent their use, markets must inevitably arise. According to Mirowski, imperfections and rigidities were being removed during the eighteenth century in England, and using the neoclassical paradigm, we would expect to see an increased use of the market mechanism for raising capital and exchanging shares in joint-stock companies. This leads him to conclude that the first premise of the

A New Look at the Dealings of the Bardi and Peruzzi with Edward III

Abstract: The Bardi and Peruzzi of Florence became in the early fourteenth century the largest merchant-bankers ever seen in medieval Europe. Their collapse in the 1340s has been attributed by most historians to huge losses on loans to Edward III of England. This article explores some flaws in the conventional explanation and shows that the firms lacked the resources to have made loans on the generally accepted scale. It also suggests means by which the companies could have recovered at least part of their advances to the king without the results appearing in government ledgers.

Was There a Golden Age of Flexible Wages? Evidence from Ohio Manufacturing, 1892–1910

Abstract: Several macroeconomic studies have found evidence of diminishing cyclical wage flexibility in the United States since the turn of the century. But the importance of wage reductions during downturns must be questioned even for the era of allegedly flexible wages. This article shows that during the severe contractions of 1893 and 1908 only a small minority of Ohio manufacturing workers experienced cuts in their wage rates.The apparent downward flexibility of average earnings in these data was largely the consequence of changes in the occupational composition of the employed work force rather than pay cuts for individual workers.

The Volume of Soviet Munitions Output, 1937–1945: A Reevaluation

Abstract: The only official measure of overall Soviet munitions output in World War II, first published in 1965, was based on changes in values, not volumes, and grossly understates change in the level of real Soviet war production. Subsequently published official data on production of ground and air munitions in physical units, supplemented by information about real spending on naval munitions, provide foundations for a new index. During the war the USSR produced more munitions than Great Britain or Germany, but much less than the United States.

The Financial Crisis of A. D. 33: A Keynesian Depression?

Abstract: In A.D. 33 a major economic and financial crisis struck the City of Rome, capital of the Roman Empire.' The crisis must have made a tremendous impression on the world at the time; otherwise, the three great historians of the period (Tacitus, Suetonius, and Dio) would not have highlighted it. Ancient writers were not commonly interested in economics. Modern historians, writing of the premodern period, have spent little effort on financial crises. While the historians have written of the seventeenth-century tulip crisis in Holland, the Mississippi Bubble in France, and the South Sea Bubble in England, these are important but rare exceptions. The financial crisis of A.D. 33 is another and very much earlier exception. Here, extensive and surprisingly sophisticated reporting from the time of the crisis has made possible substantial modern analysis. The actual crisis consisted of a sudden shortage of money and a contraction of credit which threatened to bankrupt some of Rome's most respected citizens. In evaluating this crisis, modern analysts have focused much of their work on calculations of the money supply at the time, a logical approach since the crisis had as its proximate cause a money shortage. Lacking direct monetary data, they generally rely on numismatic evidence as provided by records of issuance of coins. Various scholars, among them Tenney Frank, Michael Crawford, Cosmo Rodewald, and Barbara Levick, have suggested different causes for the crisis.2 Although Frank mentions in passing that Augustus spent far less on buildings than the Res Gestae would suggest and that Tiberius was constantly accused of stinginess, he seems to attribute the reduced money supply to an outflow of gold and silver in payments for imports.3 Crawford denies that the money supply in Rome was varied intentionally by the state at any time other than to cure (rather than to cause) the crisis of A.D. 33. Governmental expenditures are to him devoid of any impact on the money supply. He states: "There are no grounds for the old view of the story as evidence for a general currency shortage and its remedy.4 Rodewald has a lengthy discussion on the crisis in which, basing his

Collective Choice of Working Conditions: Hours in British and U.S. Iron and Steel, 1890–1923

Abstract: Twelve-hour days persisted in British and U.S. iron and steel after most industrial workers worked eight-hour days. When shorter hours finally came, sooner in Britain, they came abruptly. This article presents a model of working hours as public goods; when job attributes are shared there is a collective choice problem. In Britain, a collective bargaining mechanism reconciled the preferences of workers and capital owners and facilitated the move to shorter hours. In the United States immigrants had been willing to work long hours. When immigration was cut off, the government intervened.