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Paradox Lost: Westward Expansion and Slave Prices before the Civil War

Published online by Cambridge University Press:  03 March 2009

Mark Schmits  and
Donald Schaefer
Mark Schmits
Affiliation:
Department of Economics, Washington State University, Pullman, W A 99164.
Donald Schaefer
Affiliation:
Department of Economics, Washington State University, Pullman, W A 99164.
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Type
Discussion
Information
The Journal of Economic History , Volume 41 , Issue 2 , June 1981 , pp. 402 - 407
Copyright
Copyright © The Economic History Association 1981

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References

1 Passell, Peter and Wright, Gavin, “The Effects of Pre-Civil War Territorial Expansion on the Price of Slaves,” Journal of Political Economy, 80 (11–12 1972), 1188–1202.Google Scholar Their partial equilibrium calculation is repeated in Lee, Susan, “Antebellum Land Expansion: Another View,” Agricultural History, 52 (10. 1978), 488–502.Google Scholar

2 Passell and Wright, “Territorial Expansion,” 1189.Google Scholar

3 Lee, “Antebellum Land Expansion,” p. 493;Google ScholarMcCloskey, Donald N., “Does the Past Have Useful Economics?” Journal of Economic Literature, 14 (06 1976), 434–61.Google Scholar

4 Kotlikoff, Lawrence and Pinera, Sebastian, “The Old South's Stake in the Interregional Movement of Slaves, 1850–1860,” this Journal, 37 (06 1977), 434–50. The two-region approach actually is not as useful as it might seem because of a number of simplifying assumptions made by the authors. In addition, the models fail to suggest why an initial equilibrium would be foresaken for additional land expansion and do not allow for the well-known migration of slave owners as well as slaves. Nonetheless, we attempt to examine the issue within the context of the above-mentioned models.Google Scholar

5 See Schmitz, Mark D. and Schaefer, Donald F., “Slavery, Freedom, the Elasticity of Substitution,” Explorations in Economic History, 15 (07 1978), 327–37;Google Scholar and Wright, Gavin, The Political Economy of The Cotton South (New York, 1978).Google Scholar

6 For example, one of the key parameters in the models is the elasticity of demand for cotton. P-W use an initial point estimate of –.65 and alternative values of –. 49 and –.81 (Passell and Wright, “Territorial Expansion,” p. 1199). The standard error of that point estimate was 39, however, so their alternative range only involves a 32 percent confidence interval around –.65.Google Scholar

7 Schaefer, Donald and Weiss, Thomas, “The Use of Simulation Techniques in Historical Analysis: Railroad versus Canals,” this Journal, 31 (12 1971), 854–84.Google Scholar

8 Broadening output to include tobacco leads K-P to misspecify the demand side of their model by using the elasticity of demand for either cotton or tobacco rather than for the composite output. We correct this error below. It should also be noted that K-P atypically define the East as the eastern seaboard (including the District of Columbia) plus the border states of Kentucky and Tennessee.Google Scholar

9 Readers are referred to the original papers for derivation of the models. A longer version of this note explains the models, some minor errors in their presentation, and our reanalysis; it is available from the authors as Working Paper 1080–3, Department of Economics, Washington State University, Pullman, WA 99164.Google Scholar

10 The revised estimates for the elasticity of substitution and land's share of output refer to slave farms in the cotton South. See Schmitz and Schaefer, “Slavery,” 328–30. Lower estimates of the elasticity of substitution were found in other samples, and for farms with labor forces that were more than 50 percent slave the point estimate was 81. We used the result for all slave farms in order to be consistent with the aggregate nature of the models.Google Scholar Demand elasticity is from Wright, Political Economy, pp. 91–93. The reported result is from a Cochrane-Orcutt iterative procedure that adjusts for a first order auto-regressive system. The non-adjusted estimate is -1.125. The standard error is approximate since the reciprocal was actually reported.Google Scholar

11 There are special problems in revising the estimated elasticity of demand in the K-P model. K-P used two values: –1 and —∞, the latter being appropriate if the East and West produced different products or as a measure of the perceived elasticity if slaveowners did not realize that additional cotton production would lower cotton prices. We ignore this value. K-P originally used a unitary demand elasticity for cotton in their model. The appropriate elasticity, however, is for aggregate output, which is not equivalent because tobacco represented 43 percent of eastern output but was not grown on western land (according to the K-P regional definitions). Assuming zero cross-elasticities, the proper composite elasticity is the cotton demand elasticity divided by cotton's share of eastern output. What we refer to as the “original” K-P estimate actually is a recalculation based on this adjustment.Google Scholar

12 Preliminary Report of the Eighth Census (1860) (Washington, D.C., 1862), p. 196. The New South includes Alabama, Mississippi, Louisiana, Arkansas, Texas, and Florida, and the East is all other slave states.Google Scholar

13 Kotlikoff and Pinera, “The Old South's Stake,” p. 448,Google Scholar and Fogel, Robert W. and Engerman, Stanley L., Time on the Cross, vol. 1 (Boston, 1974), p. 76.Google Scholar

14 The normal random numbers were generated using Gauss, a subroutine from the IBM Scientific Subroutine Package.Google Scholar

15 We are taking an ex post interpretation of these results, that is, we assume that the distribution around each parameter reflects our uncertainty about its correct value. In contrast, an ex ante interpretation would attribute the variability to the effect of land expansion on slave prices. A similar point is made in Schaefer and Weiss, “Simulation Techniques,” pp. 870–72.Google Scholar

16 We can also reject the revisionist view that southeastern support of the movement arose out of a “misperception of the section's economic interest.” The point is made by Passell and Wright, “Terntorial Expansion,” p. 1200, and Lee “Antebellum Land Expansion,” p. 493. Lee goes on to argue that “given the misperception that the demand curve was perfectly elastic… southern political behavior on land issues was rational from a profit-maximizing point of view,” (emphasis added). Finally, we should point out that even a negative value of E would not imply irrationality since slave prices depended not only upon marginal productivity conditions and worldwide cotton demand but also upon the legitimacy and acceptance of the peculiar institution. Southerners after all were not interested in expansion merely as a means of increasing cotton lands; they were specifically determined to pen up new lands to slavery and thereby maintain the slave-free balance within the United States Senate.Google Scholar As noted by Gunderson, Gerald, “The Origins of the American Civil War,” this Journal, 36 (12. 1974), 915–50, a deterioration in this balance would in itself imply a reduction in slave values. Hence, slaveowners were moved not only by the relationship between slave prices and land that we have estimated but also by their interests in the system's political viability.Google Scholar

17 We should also note that the K-P model is inappropriate for answering the broader policy issues that it raises. They argue that the East could have avoided the “wealth loss” associated with migrating slaves by taxing slave sales. Their calculations of the tax effect are incorrect because they do not allow any transfer of wealth to the East in exchange for the slaves and because they hold the Western land supply constant when the slaves migrate (in which case slave sales provide disequilibrium). Moreover, the change in total eastern wealth (where total refers only to slaves and land) is inappropriate for evaluating revealed eastern sentiments toward expansion. If slave prices rose but land values fell (as now seems likely), then westward expansion redistributed wealth from yeoman landowners to slave- owners. Given the allocation of voting rights and political powers, the revealed support in the East is not difficult to understand.Google Scholar