Nightcap

  1. Second World soft power Ken White, Asian Review of Books
  2. Alas my love, you do me wrong Roderick Long, Policy of Truth
  3. The great fear of 1776 Jeffrey Ostler, Age of Revolutions
  4. Will no one defend free trade? Shikha Dalmia, the Week

Nightcap

  1. David Bergland, R.I.P.
  2. The case against the case against the American Revolution Ilya Somin, Volokh Conspiracy
  3. One of the most peculiar aspects of the history of democracy Salih Emre Gercek, Age of Revolutions
  4. Reason, naturalism, and free will David Potts, Policy of Truth

“Top 10 Things That Tipped Off Revolutionary War”

That’s the title of my weekend column over at RealClearHistory. Check it out:

5. The continued quartering of British soldiers. Imagine, for a moment, an Iraqi household being forced to give room and board to an American or a Polish soldier in 2005. That’s not quite what happened in the North American colonies but it’s not a far cry, either. The colonists of North America considered themselves to be British subjects of the Crown, and most were proud to be. (In fact, a little further down the list, you’ll see why the Americans, as rebels, were so adamant about liberalizing citizenship laws.) A much better analogy would be to imagine the LAPD or the Texas National Guard forcing households to give quarter to soldiers. The analogy is better, but the picture is still a frightening one.

Please, read the rest. The other 9 are also good. Heck, you might even learn something new…

Rosenbloom on the Colonial American Economy

Joshua Rosenbloom is an economic historian worth following if you are interested in American economic history during the colonial era. He has recently published what appears to be an overview article of the topic (probably for a book or an invited symposium) which perfectly summarizes the current state of the research. I believe that this should be widely read by interested parties.  Here are key excerpts for some of the topics he discusses. I provide some comments to enrich his contribution, but these should be understood as complements rather than substitutes to this excellent overview of the American economy during the colonial era.

On Economic Growth 

Mancall and Weiss (…) concluded that likely rates of per capita GDP growth could not have been higher than 0.1 percent per year and were likely closer to zero. In subsequent work, Mancall, Rosenbloom and Weiss (2004) and Rosenbloom and Weiss (2014) have constructed similar estimates for the colonies and states of the Lower South and the Mid-Atlantic regions, respectively. Applying the method of controlled conjectures at a regional level allowed them to incorporate additional, region-specific, evidence about agricultural  productivity and exports, and reinforced the finding that there was little if any growth in GDP per capita during the eighteenth century. Lindert and Williamson (2016b) have also attempted to backcast their estimates of colonial incomes. Their estimates rely in part on the regional estimates of Mancall, Rosenbloom and Weiss, but the independent evidence they present is consistent with the view that economic growth was quite slow during the eighteenth century.

This is still a contentious point (see notably this article by McCusker), but I believe that they are correct. In my own work, using both wages and incomes, I have found similar results for Canada and Leticia Arroyo Abad and Jan Luiten Van Zanden have found something roughly similar for the Latin American economies (Mexico and Peru).

It is also consistent with even simplistic accounts of the neoclassical growth model. The New World was an economy of abundant land input whose outputs (agricultural produce) were mostly meant for local consumption. If one wanted to increase his income, all he had to do was use more inputs at really low costs. There is very little in this situation to invest in increasing total factor productivity and incomes would only increase at the dis-aggregated level (following the same region over time) as we are capturing the extent of inputs included over time (e.g. the long-settled farmer has a high income because he has had the time to build his farm, but the short-settled farmer brings the average down because he is just starting that process).

On Monetary History and Monetary Puzzles

In lieu of specie, the colonists relied heavily on barter for local exchange. In the Chesapeake transactions were often denominated in weights of tobacco. However, tobacco was not used as a medium of exchange. Rather merchants might advance credit to planters for the purchase of imported items, to be repaid at harvest with the specified quantity of tobacco. Elsewhere book credit accounts helped to facilitate transactions and reduce the need for currency. The colonists regularly complained about the shortage of specie, but as Perkins (1988, p. 165) observed, the long run history of prices does not suggest any tendency of prices to fall, as would be expected if the money supply was too small. (…) With only a few exceptions the colonies issuance of these notes did not give rise to inflationary pressures. There is by now a large literature that has analyzed the relationship between note issuance and prices, and finds little evidence of any correlation between the series (Weiss 1970, 1974; Wicker 1985; Smith 1985; Grubb 2016. As Grubb (2016) has argued, this suggests that while the circulation of bills of credit may have facilitated exchange by substituting for book credit or other forms of barter, they did not assume the role of currency.

In this, Rosenbloom summarizes a puzzle which has been the subject of debates since the 1970s (starting with West in 1978 in this Economic Inquiry article). In many instances (like South Carolina and Pennsylvania), the large issues of paper money had no measurable effect on prices.  This is a puzzle given the quantity theory of the price level. The proposition to solve the puzzle is that as the paper money printed by colonies tended to be backed by future assets, they were securities that could circulate as a medium of exchange. If properly backed and redeemed, people would form expectations that these injections were temporary injections and there would be no effect on the price level all else being equal. Inflation would only occur if redemption promises were not held or were believed to be humbug. This proposition has been heavily contested given the limited information we hold for the stock of other media of exchange and trade balances. I have my own take on this debate on which I weigh using a similar Canadian monetary experiment (see here), but this is a serious debate. Basically, it is a historical battleground between the proponents of the fiscal theory of the price level (see notably the classical Sargent and Wallace article) and the proponents of the quantity theory of the price level.  Anyone interested in the wider macroeconomic debate should really focus on these colonial experiments because they really are the perfect testing grounds (which Rosenbloom summarizes efficiently).

On Mercantilism, the Navigation Acts and American Living Standards

The requirement that major colonial exports pass through England on their way to continental markets and that manufactures be imported from England was the equivalent of imposing a tax on this trade. The resulting price wedge reduced the volume of trade and shifted some of the producer and consumer surplus to the providers of shipping and merchant services. A number of cliometric studies have attempted to estimate the magnitude of these effects to determine whether they played a role in encouraging the movement for independence (Harper 1939; Thomas 1968; Ransom 1968; McClelland 1969). The major difference in these studies arises from different approaches to formulating a counterfactual estimate of how large trade would have been in the absence of the Navigation Acts. In general, the estimates suggest that the cost to the colonists was relatively modest, in the range of 1-3 percent of annual income. Moreover, this figure needs to be set against the benefits of membership in the empire, which included the protection the British Navy afforded colonial merchants and military protection from hostile natives and other European powers.

The Navigation Acts were often cited as a burden that the colonists despised, but many economic historians have gone over their impact and they appear to have been minimal. It does not mean that they were insignificant to political events (rent-seeking coalitions tend to include small parties with intense preferences). However, it does imply that the action lies elsewhere if someone wants to explain the root causes of the revolution or that one must consider distributional effects (see notably this article here).

These are the sections that I found the most interesting (as they relate to some of my research agendas), but the entire article provides an effective summary for anyone interested in initiating research on the topic of American economic history during the colonial era. I really recommend reading it even if all that you seek is an overview for general culture.

Rent-Seeking Rebels of 1776

Since yesterday was Independence Day, I thought I should share a recent piece of research I made available. A few months ago, I completed a working paper which has now been accepted as a book chapter regarding public choice theory insights for American economic history (of which I talked about before).  That paper simply argued that the American Revolutionary War that led to independence partly resulted from strings of rent-seeking actions (disclaimer: the title of the blog post was chosen to attract attention).

The first element of that string is that the Americans were given a relatively high level of autonomy over their own affairs. However, that autonomy did not come with full financial responsibility.  In fact, the American colonists were still net beneficiaries of imperial finance. As the long period of peace that lasted from 1713 to 1740 ended, the British started to spend increasingly larger sums for the defense of the colonies. This meant that the British were technically inciting (by subsidizing the defense) the colonists to take aggressive measures that may benefit them (i.e. raid instead of trade). Indeed, the benefits of any land seizure by conflict would large fall in their lap while the British ended up with the bill.

The second element is the French colony of Acadia (in modern day Nova Scotia and New Brunswick). I say “French”, but it wasn’t really under French rule. Until 1713, it was nominally under French rule but the colony of a few thousands was in effect a “stateless” society since the reach of the French state was non-existent (most of the colonial administration that took place in French North America was in the colony of Quebec). In any case, the French government cared very little for that colony.   After 1713, it became a British colony but again the rule was nominal and the British tolerated a conditional oath of loyalty (which was basically an oath of neutrality speaking to the limited ability of the crown to enforce its desires in the colony). However, it was probably one of the most prosperous colonies of the French crown and one where – and this is admitted by historians – the colonists were on the friendliest of terms with the Native Indians. Complex trading networks emerged which allowed the Acadians to acquire land rights from the native tribes in exchange for agricultural goods which would be harvested thanks to sophisticated irrigation systems.  These lands were incredibly rich and they caught the attention of American colonists who wanted to expel the French colonists who, to top it off, were friendly with the natives. This led to a drive to actually deport them. When deportation occurred in 1755 (half the French population was deported), the lands were largely seized by American settlers and British settlers in Nova Scotia. They got all the benefits. However, the crown paid for the military expenses (they were considerable) and it was done against the wishes of the imperial government as an initiative of the local governments of Massachusetts and Nova Scotia. This was clearly a rent-seeking action.

The third link is that in England, the governing coalitions included government creditors who had a strong incentives to control government spending especially given the constraints imposed by debt-financing the intermittent war with the French.  These creditors saw the combination of local autonomy and the lack of financial responsibility for that autonomy as a call to centralize management of the empire and avoid such problems in the future. This drive towards centralization was a key factor, according to historians like J.P. Greene,  in the initiation of the revolution. It was also a result of rent-seeking on the part of actors in England to protect their own interest.

As such, the history of the American revolution must rely in part on a public choice contribution in the form of rent-seeking which paints the revolution in a different (and less glorious) light.

On British Public Debt, the American Revolution and the Acadian Expulsion of 1755

I have a new working paper out there on the role of the Acadian expulsion of 1755 in fostering the American revolution.  Most Americans will not know about the expulsion of a large share of the French-speaking population (known as the Acadians) of the Maritimes provinces of Canada during the French and Indian Wars.

Basically, I argue that the policy of deportation was pushed by New England and Nova Scotia settlers who wanted the well-irrigated (thanks to an incredibly sophisticated – given the context of a capital-scarce frontier economy – dyking system) farms of the Acadians. Arguing that the French population under nominal British rule had only sworn an oath of neutrality, they represented a threat to British security, the settlers pushed hard for the expulsion. However, the deportation was not approved by London and was largely the result of colonial decisions rather than Imperial decisions. The problem was that the financial burden of the operation (equal to between 32% of 38% of the expenditures on North America – and that’s a conservative estimate) were borne by England, not the colonies.

This fits well, I argue, into a public choice framework. Rent-seeking settlers pushed for the adoption of a policy whose costs were spread over a large population (that of Britain) but whose benefits they were the sole reapers.

The problem is that this, as I have argued elsewhere, was a key moment in British Imperial history as it contributed to the idea that London had to end the era of “salutary neglect” in favor of a more active management of its colonies.  The attempt to centralize management of the British Empire, in order to best prioritize resources in a time of rising public debt and high expenditures level in the wars against the French, was a key factor in the initiation of the American Revolution.

Moreover, the response from Britain was itself a rent-seeking solution. As David Stasavage has documented, government creditors in England became well-embedded inside the British governmental structure in order to minimize default risks and better control expenses. These creditors were a crucial part of the coalition structure that led to the long Whig Supremacy over British politics (more than half a century). In that coalition, they lobbied for policies that advantaged them as creditors. The response to the Acadian expulsion debacle (for which London paid even though it did not approve it and considered the Acadian theatre of operation to be minor and inconsequential) should thus be seen also as a rent-seeking process.

As such, it means that there is a series of factors, well embedded inside broader public choice theory, that can contribute to an explanation of the initiation of the American Revolution. It is not by any means a complete explanation, but it offers a strong partial contribution that considers the incentives behind the ideas.

Again, the paper can be consulted here or here.

Libertarian Foreign Policy: A Dialogue on Imperialism

Pretty much the same story as that of the first years of the American Revolution including the foreign intervention and under enormously favorable circumstances than the poor Libyans encountered. After all, King Georges was no Kadafi.

Tsk tsk. You’re getting sloppy Dr Delacroix. I suspect you have re-ignited your passion for smoking ganja. Santa Cruz has a wonderful variety from around the world to choose from.

As I have previously noted, the angle we should be looking at (from a national security perspective) is the one of France during the Anglo-American War. They are the ones who intervened on behalf of a rebellious segment of the British Empire, just as we are intervening on behalf of a rebellious segment within the Libyan state.

Nevertheless, you keep repeating this tired mantra so I figure I’ll try to kill it. Right here and right now.

Let’s start with your keen observation that King George was no Ghaddafi. Aside from being totally correct, I think it would also be pertinent to point out that King George was also at the helm of a worldwide empire that was in constant rivalry with not only France for global hegemony, but also with aspirant regional hegemons throughout the world. Now contrast this position with that of Libya at the time of Ghaddafi’s offing.

King George also wielded a lot less power than did Ghaddafi. Indeed, he wielded a lot less power than most monarchs of his time period. As we both know, the British parliament held immense power, and King George was in constant conflict with them. The Rule of Law was alive and well in Britain during King George’s reign. Contrast KG’s position with that of Ghaddafi, a brutal tyrant who exercised a near-supreme will over his subjects.

Let’s review the circumstances of the positions of the two tyrants of Dr. J’s choosing before we continue any further: one of them was at the helm of a global empire and constantly held in check by his own parliament and the Rule of Law. The other was a tyrant of a mid-sized post-colonial state in North Africa who ruled with an iron fist and was spurned by most of the global community.

Can we continue?

France (whose position, remember, during the Anglo-American War is the one that most resembles our own today in regards to the Libyan excursion) was in constant conflict with Great Britain. They were fighting for global supremacy. French support, then, came not from benevolence or fear of mass migration from the U.S. to France, but from a calculated decision to strike deeply at a hated enemy, one that had recently acquired all of France’s colonies in India and North America.

The U.S., in contrast, has become involved in the Libyan civil war because of cries from weak and decadent allies to come to their aid for fear of a mass influx of Muslims into their welfare states.

Not exactly a struggle for global supremacy. I suspect you will warn your readers that China (GDP PPP per capita Intl$7,000) is watching us, of course.

The 13 colonies that fought for independence were independent polities, too. They all had their own ideas and thoughts and interests to look after when coming to an agreement with each other. Libya – one state – has merely one resource that is apple of everybody’s eye. While the American experience was one based on compromise and sectional interests, the Libyan experience is one that will be based off of the redistribution of wealth. Not a good start, if you ask me.

An observation and a question: the transitory government of Libya has recently asked NATO to continue its no-fly zone to at least the end of the year. It has recently welcomed foreign troops from Qatar to help shore up its defense forces. My question to you, Dr. J, is this: did the transitory government of the U.S. ask foreign powers to patrol their streets for them? To continue to keep their navies nearby to help dispense of any lingering British presence?

I find it suspicious that the Libyan rebels have relied so heavily upon foreign support. What is their motive for this? Most rebellions hearken calls for independence and liberty. Why do they beg the West for help? In my mind, a government – even a transitory one – that is incapable of standing on its own two feet without the support of foreign influence and power, is not a government that will long be trusted by the people it purports to govern.

Is the Libyan experience similar to that of the American one? Sure, but only a very superficial level. It would be best to leave Libya to the Libyans – warts and all.