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Steamboating on the Mississippi, 1810–1860: A Purely Competitive Industry*

Published online by Cambridge University Press:  11 June 2012

Erik F. Haites  and
James Mak
Erik F. Haites
Affiliation:
Stevenson and Kellogg, Ltd. (Toronto)
James Mak
Affiliation:
Assistant Professor of Economics, University of Hawaii
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Abstract

Estimates of costs and revenues for steamboating in the Louisville-New Orleans trade indicate that after the 1820's the steamboat transport market experienced the long–run equilibrium characteristic of purely competitive industries.

Type
Research Article
Information
Business History Review , Volume 45 , Issue 1 , Spring 1971 , pp. 52 - 78
Copyright
Copyright © The President and Fellows of Harvard College 1971

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References

1 North, Douglass C., Growth and Welfare in the American Past (Englewood Cliffs, N.J., 1966), 111.Google Scholar

2 Hunter, Louis C., Steamboats on the Western Rivers (Cambridge, 1949).Google Scholar

3 Evans, Estwick, A Pedestrious Tour of Four Thousand Miles (Cleveland, 1904), 325.Google Scholar

4 Hall, James, The West (Cincinnati, 1848), 134.Google Scholar

5 Hunter, Steamboats on the Western Rivers, 357.

6 Clearly, the optimal way of resolving this issue is to examine original steamboat records. Unfortunately, very fragmentary records exist and these do not give any conclusive picture of steamboat profitability, The conditions under which they operated were not conducive to the preservation or the keeping of systematic records. See also Ibid., 384.

7 Lytle, William M., Merchant Steam Vessels of the United States, 1807–1868 (Mystic, Conn., 1952)Google Scholar; and Supplements No. 2 and No. 3 (1954 and 1958).

8 “Report on the Shipbuilding Industry of the United States,” VIII, Report of the Tenth Census (1884), 176.

9 The decline in the average lifespan of steamboats over 200 tons during the 1840–1849 decade must have been the result of the suspension in 1838 of the federal government's river improvement work. The increase in the average lifespan of such steamboats during the 1850–1860 period resulted from the strict inspection and safety regulations required by the Act of 1852.

10 Steamboat costs were usually given on a dollars per ton basis.

11 Hall, The West, 129.

12 Most sources gave the average lifespan of all steamboats on the western rivers as five years throughout the antebellum period. The discrepancy between this estimate and our estimates, however, can easily be explained. The average lifespan of all western river steamboats was calculated for each period using the Lytle List. The result was an average lifespan of 5.7 years prior to 1820, 4.8 years during the 1820–29 decade, 5.0 years during the 1830–39 decade, 4.9 years during the 1840–49 decade, and 5.9 years during the 1850–60 period. Thus, the average lifespan of all western river steamboats was about five years for most of the antebellum period, but the average lifespan of the larger steamboats operating in the Louisville-New Orleans trade was about six years for most of this period. Operating a small steamboat on the shallower sections of the river system must have been more dangerous than operating a large steamboat in the Louisville-New Orleans trade.

13 Embree, Davis, The Western Boatmen, I (January, 1848–August, 1849), 313–15.Google Scholar

14 Ibid., 313–14; Hall, The West, 167.

15 Mr. J. L. Wilmers of Neare, Gibbs and Co., River Marine Underwriters, Cincinnati, Ohio, in a letter dated March 20, 1967 estimated that of the steamboats five years old, or less, 45 per cent carried insurance prior to 1830, 60 per cent carried insurance between 1830 and 1850, and 80 per cent carried insurance after 1850. He also estimated that of the vessels over five years old, 20 per cent carried insurance prior to 1830, 40 per cent carried insurance between 1830 and 1850, and 55 per cent carried insurance after 1850.

16 Hunter, Steamboats on the Western Rivers, 366.

17 Ibid., 443; Huber, Leonard V., Advertisements of Lower Mississippi Steamboats 1812–1920 (West Barrington, R.I., 1959), 97Google Scholar; Report of the Steam Marine of the U.S., Sen. Ex. Doc. 42, 32 Cong., 1 sess. (1852), 13–14.

18 Hunter, Steamboats on Western Rivers, 445.

19 Cobbett, William, A Year's Residence in America (London, 1819), 209Google Scholar; Embree, The Western Boatmen, 316; Flugel, Felux, “Pages from a Journal of a Voyage Down the Mississippi to New Orleans in 1817,” Louisiana Historical Quarterly, VII (1924), 434Google Scholar; Hall, James, Statistics of the West at the Close of the Year 1836 (Cincinnati, 1836), 145Google Scholar; Hall, The West, 129; Hunt's Merchants' Magazine, I (July–December, 1839), 457Google Scholar; Morrison, John H., History of American Steam Navigation (New York, 1958), 229Google Scholar.

20 Gould, E. W., Fifty Years on the Mississippi (Columbus, Ohio, 1951), 118Google Scholar; Hall, The West, 235–36; Hunter, Steamboats on the Western Rivers, 266, 650–51; Henshaw, Leslie S., “Early Steamboat Travel on the Ohio River,” Ohio Archaeological and Historical Publications, XX (1911), 383Google Scholar; Hunt's Merchants' Magazine, I (July-December, 1839), 457Google Scholar; Morrison, History of American Steam Navigation, 229, 232, 237; Report of the Committee on Roads and Canals on the Bill to Authorize the Purchase of Stock in the Louisville and Portland Canal Co., Sen. Doc. 577, 26 Cong., 1 sess. (1840), 13–14.

21 Hall, The West, 132; Report on Harbor and River Improvements, House Report 741, 30 Cong., 1 sess. (1848), 117.

22 Hall, The West, 131; Hunter, Steamboats on the Western Rivers, 362, 658; Walker, C. B., The Mississippi Valley, and Prehistoric Events (Burlington, Iowa, 1880), 251–52Google Scholar; Memorial of the Citizens of the City of Cincinnati Relative to the Improvement of the Navigation of the Ohio and Mississippi Rivers, House Doc. 126, 27 Cong., 3 sess. (1843), 4; The Louisville Directory, 1832, 126; Report of the Committee on Roads and Canals on the Bill to Authorize the Purchase of Stock in the Louisville and Portland Canal Co., 35; Documents Relating to the Preservation of Passengers from Injuries Resulting from Steamboat Accidents, Sen. Doc. 4, 31 Cong., Spec. Sess. (1849), 72.

23 Mail contracts were awarded only to the fastest and safest boats. Even then, a mailcarrying boat's income from this source would have been approximately $500 per year on the Louisville-New Orleans route. Failures and Irregularities of the Mail from New York to New Orleans, House Doc. 159, 26 Cong., 1 sess. (1840), 7–8.

24 Hunter, Steamboats on the Western Rivers, 373–74.

25 Faux, William, Memorable Days in America (Cleveland, 1904), 197–98Google Scholar; Meyer, Henry B., History of Transportation in the United States Before 1860 (Washington, 1917), 77.Google Scholar

26 Mills, Robert, A Treatise on Inland Navigation (Baltimore, 1820), 45–56.Google Scholar

27 Hunt's Merchants' Magazine, XVIII (January-June, 1848), 494Google Scholar.

28 Hall, The West, 208, 210. If we compared the 1842 and 1846 tonnage figures, there appears to have been a doubling of tonnage over the four years. This was not the case, suggesting that one or both of the estimates is incorrect. It was assumed here that each report was internally consistent, however.

29 Hunter, Steamboats on the Western Rivers, 382.

30 Berry, Thomas S., Western Prices Before 1861 (Cambridge, 1943), 56.Google Scholar

31 Hunter, Steamboats on the Western Rivers, 376.

32 Ibid.; Berry, Western Prices Before 1861, 57.

33 Babin, Claude H., “The Economic Expansion of New Orleans Before the Civil War” (Ph.D. thesis, Tulane University, 1953Google Scholar) contains a good discussion of the operation of the commission house system in New Orleans before the Civil War.

34 See for instance, The Louisville Price Current, 1860.

35 Callendar, Guy S., Selections from the Economic History of the United States 1765–1880 (Boston, 1909), 279Google Scholar; Debow's Review, II (July-December, 1846), 58Google Scholar; Frantz, Joe B., “Trips Up the River: 1855 and 1857), Louisiana History, I (1960), 148Google Scholar; Hunt's Merchants' Magazine, XIX (July-December, 1848), 589Google Scholar; XXVIII (January-June, 1853), 263; Mills, A Treatise on Inland Navigation, 45–56; Morrison, History of American Steam Navigation, 231, 248; Niles' Register, LVI (March–September, 1839), 278Google Scholar; Navigation of the Mississippi River, House Doc. 11, 20 Cong., 1 sess. (1827), 5; Report on the Expediency of Making Further Provisions for the Improvement of the Navigation of the Ohio and Mississippi Rivers, House Report 213, 20 Cong., 2 sess. (1828), 3; The Statistics and History of the Steam Marine of the United States, Sen. Ex. Doc, 31 Cong., 2 sess. (1851), 113; Commerce, Tonnage, etc. … of the Ohio and Other Western Rivers, House Exec. Doc. 48, 34 Cong., 3 sess. (1857), 7–8.

38 Professor Ray Battalio suggested a most interesting alternative method of calculating annual downstream revenue. He argued that, since a steamboat generally did not operate twelve months a year (insofar as it had to come out of the water for repairs every season), an owner would make sure that the months which a boat did operate were likely to be the most profitable ones. Presumably, the most profitable periods during a season were those in which we see the largest number of boats in the water. These periods also corresponded to the peak shipping seasons for farmers (i.e., fall and spring) when the stage of the river was also at its highest. It turns out that freight rates during these periods were the lowest over a season. Battalio suggested that we assume a full load carried and multiply the freight load by the lowest rate in order to obtain the revenue for one downstream trip. Then if we multiplied the revenue figure by the number of round trips made a season, we would obtain an upper bound estimate of the annual downstream revenue earned by a steamboat.

We felt that Battalio's method has considerable merit. Among other advantages, it has a behavioral postulate while ours does not. It turns out that the answers derived in both cases (according to Battalio's own calculations) were the same.

37 Gould, Fifty Years on the Mississippi, 67.

38 Johnson, Emory R., History of the Domestic and Foreign Commerce of the United States (Washington, 1915), I, 213.Google Scholar

39 See for instance, Morrison, History of American Steam Navigation, 248; Embree, Western Boatmen, 109.

40 In our case, excess of total revenue over total cost would be defined as “excess” profit, or return to entrepreneurship (see below). Optimally, we should include the premium on entrepreneurship in our cost calculations in order to determine the true supply price of steamboating. However, there is no way to determine what an adequate return would be.

41 It is useful to point out that the object in calculating steamboat profits is not to prove the existence of pure competition in the steamboat transport market. The proof of perfect competition can be deduced from the descriptive properties of the market itself. As Peter McClelland pointed out in a written commentary on our paper, “as a proof that steamboating was a purely competitive industry because profits were ‘normal,’ it is both unconvincing and beside the point; unconvincing because given the large number of arbitrary assumptions employed to derive the final estimates, the reader inevitably retains doubts about the close balancing of costs and revenues in Table 2; beside the point because if data can be assembled — and they can (cf. Hunter) — to establish ease of entry and a large number of participants competing, then one knows that the industry was competitive and by implication that profits were normal, not abnormal.” Rather, profits were calculated as another piece of evidence on costs and revenues of steamboating. That is to say, given the difficulties of assembling cost and revenue data on steamboating, the conformity of our calculated profits to our expectations (given the competitive character of this market) offers another sensitivity test (in addition to benchmarks already used) of the impact of our numerous assumptions on cost and revenue estimates of steamboating on the Ohio and Mississippi Rivers before the Civil War.

42 See for instance, Hunter, Steamboats on Western Rivers, 384–89.

43 Palmer, Charles K., “Improvement and Navigation of the Ohio River, 1787 to 1925” (M.A. thesis, Indiana University, 1932), 68.Google Scholar

44 According to Lance Davis, “Capital can be said to be immobile if savers are unwilling or unable to make their accumulations available to capital users whose activities yield the highest return.” Davis, Lance E., “Capital Immobilities and Finance Capitalism,” Explorations in Entrepreneurial History, I (Fall, 1963Google Scholar), reprinted in Purdue Faculty Papers in Economic History, 1956–1966 (Homewood, Ill., 1967), 582.Google Scholar

45 Ibid., 583.

46 Once in the 1830's and again in the 1850's, capital, some from the East but largely from abroad, moved to the West in response to its need for long term finance to build its canal and railway systems.

47 Hunter, Steamboats on Western Rivers, 357–361.

48 Latrobe, John H. B., The First Steamboat Voyage on the Western Waters (Baltimore, 1871).Google Scholar

49 For a more detailed discussion of these legal developments, see Hunter, Steamboats on Western Rivers, 11–14.

50 See for instance, Morrison, History of American Steam Navigation, 248; Embree, Western Boatmen, 109.