Showing papers in "The Journal of Economic History in 1996"

The Gold Standard as a "Good Housekeeping Seal of Approval>"

Abstract: In this article we argue that during the period from 1870 to 1914 adherence to the gold standard was a signal of financial rectitude, a "good housekeeping seal of approval," that facilitated access by peripheral countries to capital from the core countries of western Europe. Examination of data from nine widely different capital-importing countries, using a model inspired by the Capital Asset Pricing Model, reveals that countries with poor records of adherence were charged considerably more than those with good records, enough to explain the determined effort to stay on gold made by a number of capital-importing countries. T he global economy in its present form emerged in the half century before World War I. That "golden age" was characterized by massive interregional flows of capital, labor, and goods. It was also an era when most nations adhered to (or attempted to adhere to) the gold standard rule of convertibility of national currencies into a fixed weight of gold. Common adherence to gold convertibility in turn linked the world together through fixed exchange rates. In this article we argue that adherence to the gold standard also served as "a good housekeeping seal of approval" that facilitated access by peripheral countries to capital vital to their development from the core countries of western Europe. We view the gold standard as a contingent rule or a rule with escape clauses. Members were expected to adhere to convertibility except in the event of a well-understood emergency such as a war, a financial crisis, or a shock to the terms of trade. Under these circumstances, temporary departures from the rule would be tolerated on the assumption that once the emergency passed, convertibility at the original parity would resume.' It is well known that a number of core countries (England, France, and Germany as well as several other developed western European countries) adhered to this rule before 1914. Even a number of developing peripheral countries also did so (Canada, Australia, and the United States), or

Globalization, Convergence, and History

Abstract: There were three epochs of growth experience after the mid-nineteenth century for what is now called the OECD “club”: the late nineteenth century, the middle years between 1914 and 1950, and the late twentieth century. The first and last epochs were ones of overall fast growth, globalization, and convergence. The middle years were ones of overall slow growth, deglobalization, and divergence. Thus history offers an unambiguous positive correlation between globalization and convergence. When the pre-World War I years are examined in detail, the correlation turns out to be causal: globalization played the critical role in contributing to convergence.

The French Crime of 1873: An Essay on the Emergence of the International Gold Standard, 1870–1880

Abstract: This article attempts to provide a new view of how the bimetallic standard was maintained before 1873 and how it came to change into a monometallic gold standard between 1870 and 1880. The conventional view that the gold standard emerged out of the contradictions of bimetallism is not persuasive. Instead, this article claims that bimetallism might have survived and provides an alternative explanation of the emergence of the gold standard. Political and historical factors proved essential in precipitating the uncoordinated emergence of the international gold standard.

Anomalies in Economic History: Toward a Resolution of the "Antebellum Puzzle"'

Abstract: To be criticized by such an eminent scholar as Robert Gallman, one of the leaders of the cliometric paradigm switch of the 1960s, is in many ways an honor. His critique of my 1987 article, wherein I argued that a diminution in the physical stature of West Point Cadets for a generation prior to the Civil War was related to a decrease in per capita food consumption, should be taken seriously.1 The interest generated by the anthropometric research program since Richard Steckel's pioneering publications on the physical stature of American slaves has been predicated to a considerable degree on the discovery that heights declined at the onset of modern economic growth in both Europe and America.2 First noted in Robert Margo and Steckel's examination of Union Army records, the socioeconomic correlates of the antebellum decline in heights urgently needed analysis: what caused it; what determined its turning point?3 The existence of this "antebellum puzzle" called into question much of the common wisdom about U.S. economic development, because the nutritional status of a population was hardly expected to decrease when per capita output was increasing by some 50 percent between 1830 and 1860.4 My original aim was to ascertain if the anomaly could be reproduced on the basis of independent evidence, such as data from the West Point Military Academy. The results did confirm Margo and Steckel's work: beginning with the birth cohorts of the late 1830s, the cadets' heights decreased throughout the antebellum period (Figure 1). The declines were not large, but they were by no means negligible either: 2.1 centimeters among soldiers and 1.4 centimeters among the cadets (between the 1820s and 1860s).5 Subsequent research has reproduced these results many times over: among the free blacks of Maryland, among Georgia convicts, among Amherst students, among Ohio National Guardsmen, as well as among Pennsylvanian soldiers.6 Hence, there are now seven samples that are consistent with the antebellum puzzle! Steckel concludes: "While one may quibble with estimates of short-term fluctuations from these sources, the existence of a substantial secular decline in the mid-to-late nineteenth century is well established."7 Gallman nonetheless casts doubt on my argument that there was a nutritional shortfall

Home Demand and British Industrialization

Abstract: Household budget studies are used to assess working-class demand for manufactures over industrialization. Contrary to demand-side proponents, increased urbanization, enhanced opportunities for women's and children's work, and a declining subsistence sector all retrenched consumption patterns into demand for the products of traditional industries and decreased demand for the products of new manufacturing industries. However, consideration of national expenditure on necessities shows an increasing surplus available for discretionary expenditure between 1801 and 1841. This reflects an increased purchasing power of the middle and upper classes that may have manifested itself as substantially increased demand for domestic manufactures.

Married Women's Property Laws and Female Commercial Activity: Evidence from United States Patent Records, 1790–1895

Abstract: Nineteenth-century laws granted wives previously withheld rights to their own property and earnings as well as liability for debts and contracts. I use 4,198 women's patents to assess whether these laws encouraged greater female commercial activity. Patentees were motivated by potential profits and were responsive to market incentives. Women's patenting jumped significantly in states with legal reforms and was lowest in states without such laws. Much of the subsequent increase occurred in metropolitan centers where property rights were of greater concern. Thus, by reducing transactions costs and increasing expected benefits, legal reforms arguably stimulated women's investments in patenting and commercial activities.

The Debasement Puzzle: An Essay on Medieval Monetary History

Abstract: We establish several facts about medieval monetary debasements: they were followed by unusually large minting volumes and by increased seigniorage; old and new coins circulated concurrently; and, at least some of the time, coins were valued by weight. These facts constitute a puzzle because debasements provide no additional inducements to bring coins to the mint. On theoretical and empirical grounds, we reject explanations based on by-tale circulation, nominal contracts, and sluggish price adjustment. We conclude that debasements pose a challenge to monetary economics.

Health and Labor Force Participation of Older Men, 1900–1991

Abstract: I use Body Mass Index (BMI) to investigate how the ralationship between health status and retirement among older men has changed since 1900. Although BMIs for the elderly were much less healthy in 1900 than today, the BMI level that maximizes labor force participation rates has not changed. However, in 1900 the elasticity of nonparticipation with respect to BMI was greater than it is today, suggesting that health is now less important to the retirement decision than in the past. Other factors (especially rising income) are more important than health in explaining the historical changes in retirement rates.

Was There a National Labor Market at the End of the Nineteenth Century? New Evidence on Earnings in Manufacturing

Abstract: Average annual earnings calculated from the census of manufactures are used to extend previous research on labor market integration in the United States. In contrast to earlier research examining occupational wage rates, census average earnings indicate that a well-integrated labor market had emerged in the Northeast and North Central regions as early as 1879. They also reveal substantial convergence within the South Atlantic and South Central regions, suggesting the emergence of a unified southern labor market. Large and persistent North-South differentials indicate, however, that a unified national labor market did not develop before World War I.

Changes in the Cyclical Behavior of Real Wage Rates, 1870–1990

Abstract: A modern household's consumption bundle is more finished than that of a typical worker in the past: the average consumption good passes through more stages of production before purchase. This has affected the cyclical behavior of wages relative to the price of the consumption bundle because wages are more procyclical relative to prices of more-finished goods. Nowadays real consumption wages are procyclical. They were less procyclical before the Second World War, and they may have been acyclical or even countercyclical before the First World War.

Efficient Transactors or Rent-Seeking Monopolists? The Rationale for Early Chartered Trading Companies

Abstract: India companies, established in 1600 and 1602, respectively, with a national monopoly of trade with Asia. Other English companies to be granted trading monopoly charters included the Muscovy Company (1553), the Hudson's Bay Company (1670), and the Royal African Company (1672), and similar rights were granted to foreign companies by the governments of France, Spain, Sweden, and Denmark. The grant of exclusive trading rights to particular areas had long been enjoyed by chartered companies, a notable example being the Company of Merchant Adventurers. The earliest companies, which handled well-established trades, were organized as regulated companies in which the governing body, having negotiated trading treaties and established warehouse facilities, merely set broad operational parameters within which members traded on their own account. Entry to the regulated companies was relatively unimpeded, often through payment of a small fine. The companies that appeared from the middle of the sixteenth century were rather different, their monopoly status being seen as encouragement and recompense for forging new trading links. Entry was by the purchase of shares in a joint-stock company, which exploited monopoly powers by trading as a corporate enterprise. Some shareholders were merchants actively engaged in trade, but others were passive investors who delegated management to paid officials directed by a governor and assistants elected from amongst their ranks. Adam Smith, no friend of the chartered companies, argued that this separation of ownership from control contributed to gross administrative inefficiency, inattention to detail, and the pursuit of managerial goals, which raised prices to consumers and reduced returns to shareholders. He believed that only the extraction of monopoly rents ensured the success and continuance of such companies.1 In a recent series of articles, Ann Carlos and Stephen Nicholas have cast doubt upon this traditional interpretation. They argue that the joint-stock chartered companies, far from being comparatively inefficient institutions, represented the optimal organizational form for conducting long-distance trade. The chartered companies' business, like that of the late-nineteenth-century multinationals, was "characterized by a large volume of transactions in many different locations," which prompted a similar organizational response, namely, the adoption of a vertically integrated structure and an administrative hierarchy that enabled them to economize on transaction costs and overcome the limits to management encountered by owner-managed firms. Like modern multinationals, the chartered companies adopted control systems that were intended to limit opportunistic

The Poverty of Impoverishment Theory: The Economic Well-Being of the Elderly, 1890–1950

Abstract: Progressive Ear and New Deal reformers claimed that industrialization impoverished the elderly by degrading older workers. This has become the standard interpretation in popular and scholarly accounts. Data from 1890 through 1950 show that real wages of older workers rose sharply during this peroid and that family economic strategies promised the elderly considerable security. Birth cohort analysis indicates positive age-earnings profiles across the life cycle. Although the elderly benefited from economic growth, security in old age often demanded intrafamilial exchanges. Tensions arising from these transfers may explain the broad popular support Social Security received.

The Scale of Production in Western Economic Development: A Comparison of Official Industry Statistics in the United States, Britain, France, and Germany, 1905–1913

Abstract: We use census data and information on large firms to generate descriptions of structural features of Western industry around 1906. We find that although the United States conforms to existing stereotypes, most other nations do not. German industry stands out as having the smallest plants and firms and the lowest concentration levels both in the aggregate and when grouped by industrial classifications. Equally startling, French levels of plant size and concentration are comparable to those of the United States. We speculate on the importance of these results for rethinking the traditional analysis of industrial development in the early twentieth century.

Turnover Cost and the Distribution of slave Labor in Anglo-America

Abstract: In the eighteenth-century British Empire and the antebellum South, slaves were concentrated in domestic service and rural enterprises like agriculture and ironworks. I argue that employers in these sectors chose to employ slaves rather than free labor because they faced especially high turnover costs—that is, costs of searching for a worker and going without labor when a free worker quit or was fired. In the absence of slavery, these sectors were marked by other institutions designed to deal with turnover costs: indentured servitude, employment agencies, and deferred compensation.

Theory and History: Seventeenth-Century Joint-Stock Chartered Trading Companies

Abstract: managers abroad. In those articles on managing the manager, we used archival sources to assess whether these companies recognized the problem of agency and to determine what mechanisms were implemented to attenuate the agency problems created by hierarchy. We concluded that the Hudson's Bay Company and the Royal African Company designed mechanisms well suited to controlling agent opportunism.2 In an attempt to reverse 20 years of revisionist history, S. R. H. Jones and Simon P. Ville assert that these seventeenth-century trading companies were inefficient organizations for

The Jurisprudence of American Slave Sales

Abstract: An analysis of all appellate cases involving slave-sales reveals that southern courts helped minimize the costs of trading in slaves. Slave-sales law also surpassed other contemporaneous commercial law in sophistication. Why? Greater information gaps between slave buyers and sellers called for more complex institutional support. The enormous property value embodied by slaves also led to more litigation, greater need for settled law, and a more even match of power between plaintiff and defendant. Additionally, legal rules surrounding slave sales substituted for the employment law governing free-labor markets.

Myth of the Industrial Scrap Heap: A Revisionist View of Turn-of-the-Century American Retirement

Abstract: Using the census survival method to calculate net flows across employment states between 1900 and 1910, we find that approximately one-fifth of all men who reached the age of 55 eventually retired before death. Many of these retirees appear to have planned their withdrawal from paid employment by accumulating assets, becoming self-employed, and then liquidating their assets to provide a stream of income to finance consumption in old age. This “modern” retirement behavior has important implications for the economic history of capital and labor markets, of saving and investment, of insurance and pensions, and of the family economy.

Myth and Reality of China's Seventeenth-Century Monetary Crisis

Abstract: The impact of China's demand for silver on global trade in specie and monetary metals during the sixteenth and seventeenth centuries remains poorly understood Conventional wisdom postulates that seventeenth-century China became so dependent on foreign silver to sustain domestic economic growth that a sharp fall in silver imports in the 1640s led to the fall of the Ming dynasty in 1644 This hypothesis rests on dubious theoretical and empirical grounds The demand for silver in China was determined by long-term changes in indigenous demand for money rather than short-term fluctuations in the flow of silver imports

Did Japan Ever Suffer From a Shortage of Natural Resources Before World War II

Abstract: Until the end of the nineteenth century, Japan raised its per capita income, starting from a low level, by exporting primary commodities and importing manufactured goods. Around the turn of the century, Japan became a net importer of natural resources. Yet it is doubtful that Japan ever suffered severely from a shortage of natural resources before the Manchurian Incident of 1931. It was the military expansion in the 1930s that created an artificial shortage of mineral resources, the wholesale exodus of population, and a lowering in the standard of living of the general public. T his article deals with the problem of whether a shortage of natural resources has ever been a serious problem in Japanese economic history. It starts with the identification of the problem in the period 1800 to 1859, proceeds to the situation following the opening of the country to Western trade in the years 1859 to 1899, and finally investigates Japan's economic position in the twentieth century. The latter half of the Tokugawa Period has often been described as a Malthusian one, but it will be shown that Japan in this period was a primary-exporting country despite a shortage of land, with increasing per capita income over time. In the years 1859 to 1899, this feature of the economy became even more evident with the beginning of large-scale trade. Another feature to be clarified for this period are the gains from trade, or the gains from improvement in the terms of trade. Then the concept of "a rich country, a strong army," which suggests that the Meiji government played a prominent economic and military role, will be

Protection Against a Capricious State: French Investment and Spanish Railroads, 1845-1875

Abstract: Infrastructure construction is often associated with excessive, even corrupt, profits. This article argues that construction profits earned in Spanish railroads in the mid-nineteenth century were a response to the lack of credibility of the Spanish state. It also makes the first attempt to document excess construction profits in Spanish railroads by demonstrating, for example, financial links between railroad stockholders and the providers of construction goods and services and by directly estimating construction profits. The estimated excess construction profits only provided railroad entrepreneurs with a normal rate of return to their entire railroad-related invest

Dietary Change in Antebellum America

Abstract: In his essay, "Height and Weight of West Point Cadets: Dietary Change in Antebellum America," John Komlos claimed that, beginning with the birth cohort of the 1820s, the heights of West Point cadets fell and that the "trend bottomed out in the [birth cohort of the] 1860s and generally reversed in the 1870s.''1 He believed that this decline reflects a general development in the American population, and that it was due to a reduction in available nutrients per capita. According to Komlos, the nutrient shortfall was in turn due to the inability of American agriculture to meet the demands placed upon it by the pronounced structural changes the economy was undergoing during this period. The case seems to me less secure than Komlos believed it to be. The next section of this note deals with the height data. The third and fourth treat Komlos's measurement and interpretation of food production and consumption, and the fifth is a brief conclusion.

The Rental Price of Housing in New York City, 1830–1860

Abstract: Advertisements from antebellum New York City newspapers are used to estimate hedonic indices of the rental price of housing. Rents varied with the quality of housing and its location, suggesting a well-defined market for rental housing. Controlling for housing characteristics and location, the relative price of housing rose between 1830 and 1860.

Who Financed the Transportation Revolution? Regional Divergence and Internal Improvements in Antebellum Pennsylvania and Virginia

Abstract: Comparing investment in transportation companies in Albemarle county, Virginia, and Cumberland county, Pennsylvania, I analyze why nineteenth-century internal improvements revolutionized the northern economy, but only seemed to increase the South's dependence upon plantation agriculture. In both counties local investors and financed early improvements.

The durable experiment: State insurance of workers' compensation risk in the early twentieth century

Abstract: In the early 1910s state governments debated the private versus public underwriting of workers' compensation risk. The choices they made established the existing system today and set the stage for later debates over the government's underwriting of unemployment, health, and disability risks. This article offers both quantitative and case-study analyses of states' original choices between public and private insurance. Monopoly state funds were adopted in some states because of an unusual combination of strong unions and weak insurance and agricultural interests. In other states, the emergence of progressive political coalitions played the decisive role.

Bonds without Bondsmen: Tenant-Right in Nineteenth-Century Ireland

Abstract: Tenant-right, or a tenant's right to sell his holding, was one of the most puzzling institutions of nineteenth-century Irish land tenure. Historians have argued that the institution reflects the tenants' assertions of a proprietary interest in the land, an assertion often backed up by threats and violence. In this article we argue that landlords respected tenant-right because they could profit from the instistution. Our model reflects comments by contemporaries and explains that tenant-right functioned as a bond aganist nonpayment of rent and was part of a rational landlord's income-maximizing strategy.