This article reassesses the importance of colonial status to investors before 1914 by means of multivariable regression analysis of the data available to contemporaries. We show that British colonies were able to borrow in London at significantly lower rates of interest than noncolonies precisely because of their colonial status, which mattered more than either gold standard adherence or the sustainability of fiscal policies. The “empire effect” was, on average, a discount of around 100 basis points, rising to around 175 basis points for the underdeveloped African and Asian colonies. Colonial status significantly reduced the default risk perceived by investors.

Extreme variation in the extent of inequality emerged early across the New World colonies established by the Europeans, and we hypothesized in previous work that these contrasts persisted over time through systematic differences in the ability and inclination of elites to shape legal frameworks to advantage themselves. We find support for this view in how the rules governing the extension of suffrage evolved over time within the United States, and across the societies of the Americas. Polities with labor scarcity and greater equality generally led in broadening the franchise and attaining high rates of participation in elections.

The familiar transaction-costs model is extended to allow for the varying costs and benefits of supervision and pain incentives on the one hand, and ordinary rewards on the other, in differentially effort- and care-intensive activities. Applied to unfree labor, this model accounts for the observed patterns of slave governance and manumission in extractive, industrial, agricultural, and service activities in antiquity and in the New World. Applied to free labor, it accounts for wage work on large estates in labor-surplus medieval England or modern Italy, the choice between bonuses and penalties in industrial contracts, and the growing paternalism of our own time.

European economic history has always been concerned with the grand theme of the rise of the Western World. Sometimes this is put in terms of the transition from feudalism to capitalism and, if a Marxian dialectician is present, eventually to socialism. The literature is essentially the product of historians and as such is particularistic. No consistent theoretical foundation runs through it, except perhaps the Marxian one. The result is a chaotic output for which generalization is difficult, and in which bits and scraps of evidence are proffered for almost every specific explanation. This has helped the Marxist explanation to survive since, despite its evident shortcomings, it does provide a single path through the wilderness of medieval and modern European economic history.

Before the eighth–ninth centuries CE, most Jews, like the rest of the population, were farmers. With the establishment of the Muslim Empire, almost all Jews entered urban occupations despite no restrictions prohibiting them from remaining in agriculture. This occupational selection remained their distinctive mark thereafter. Our thesis is that this transition away from agriculture into crafts and trade was the outcome of their widespread literacy prompted by a religious and educational reform in Judaism in the first and second centuries CE, which gave them a comparative advantage in urban, skilled occupations. We present evidence that supports our argument.

Exploiting complete census manuscript files, we derive a new segregation measure using the racial similarity of next-door neighbors. The fineness of our measure reveals new facts not captured by traditional segregation indices. First, segregation doubled nationally from 1880 to 1940. Second, contrary to prior estimates, Southern urban areas were the most segregated in the country and remained so over time. Third, increasing segregation in the twentieth century was not strictly driven by urbanization, black migration, or white flight: it resulted from increasing racial sorting at the household level. In all areas—North and South, urban and rural—segregation increased dramatically.

The modern concept of the wealth of nations emerged by the early twentieth century. Capital embodied in people—human capital—mattered. The United States led all nations in mass postelementary education during the “human-capital century.” The American system of education was shaped by New World endowments and Republican ideology and was characterized by virtues including publicly funded mass education that was open and forgiving, academic yet practical, secular, gender neutral, and funded and controlled by small districts. The American educational template was a remarkable success, but recent educational concerns and policy have redefined some of its “virtues” as “vices.”

This paper attempts to provide an explanation of the formation and mutation of economic institutions. It is specifically concerned with that process as it has developed over the past one hundred and seventy-five years of American history, but with appropriate changes the model might be used to predict institutional change in the future and to explain institutional change in other nations and in other eras. Like more traditional theory, the model has been formulated in a manner that makes it in principle operational, although we admit that it predicts relatively little. Profit maximization is the motivating force, and in this sense too the model fits into the stream of neo-classical economics, although like the macro models of Keynes its subject has not traditionally been considered a part of that discipline. Finally, we admit that the theory is at some points woefully weak and the explanations at times incredibly simplistic. The work, however, does, we feel, represent a first step towards a useful theory of institutional change.

The contribution to growth from the steam engine—Industrial Revolution icon and prime example of a “General Purpose Technology”—has remained unclear. This article examines the role that a particular design improvement in steam power, embodied in the Corliss engine, played in the growth of the U.S. economy in the late nineteenth century. Using detailed data on the location of Corliss engines and waterwheels and a two-stage estimation strategy, we show that the deployment of Corliss engines served as a catalyst for the industry's massive relocation into large urban centers, thus fueling agglomeration economies and further population growth.

Many economic historians, like most economists, depend on standard growth accounts to provide some quantitative description of the proximate sources of growth, but this is misleading. American growth experience illustrates the difficulty. The seeming major contribution of tangible capital accumulation to nineteenth-century growth was the consequence of scale-dependent and capital-using technological progress. The large twentieth-century contributions of education and R&D conceal technology's new intangible capital-using bias. Additionally, reverse forces run from capital accumulation to technological progress. Without a greater understanding of these interactions, our knowledge of even the proximate sources of growth is incomplete.

The meteoric rise of the new economic history reflects the fact that historians abhor a vacuum and sometimes it seems to reflect an even baser instinct that any theory is better than no theory. Of course, any explanation always uses theory; however, it was usually implicit and frequently a bouillabaisse in which Marx, Veblen and the German historical school floated around in as equally indigestible lumps. But the combination of an internally consistent paradigm based on a few simple assumptions and the mysteries of econometrics simply overwhelmed the older historian, as much as anything else, because he could not understand the rules of the game, much less play it. But even while the new breed was destroying one traditional explanation after another, the traditional historian even in retreat kept muttering over and over, “But you are destroying the existing myths without replacing them. Soon there will be no explanation—no economic history—just an immense heap of numbers.” And sometimes, plaintively from the left flank of the retreating historians, there would come the cry, “But institutions ARE important!”

It is necessary not only that capital be accumulated, but also that it be mobilized for productive use, if an economy is to benefit from an increase in capital per person. The classical model of resource allocation assumes that within any economy capital is perfectly mobile. It implies, therefore, that once allowance is made for uncertainty and risk, returns on investment are equal in all industries in all regions. Such a model, while logically consistent, is not very useful for analyzing the process of economic growth. In the early stages of development, because the uncertainty discounts are high, capital is not very mobile. As a result, rates of return vary widely between industries and between regions; and growth in high-interest regions is retarded. Development, in part then, takes the form of a reduction in uncertainty discounts—a reduction that makes it possible for capital to move more freely between regions and industries.

The study of French enterprise and entrepreneurship is rewarding for two major reasons. In the first place, anything that will help explain the present weakness of French industry and commerce throws light in turn on one of the most important political phenomena of the last 150 years: the fall of France from hegemony under Napoleon to the position she holds today. Secondly, the history of French business and businessmen is significant precisely because of France's relatively minor place in the economic world. If we are to weigh the validity of the recent emphasis of theorists on the role of the entrepreneur qua se in the over-all process of economic change—on the contribution of the personal element to the impersonal operation of the system—we must consider not only the more “modern” nations but those less industrialized as well. It will not suffice to study the progress of American or German business and deduce therefrom impressive theories on the importance of the businessman. The converse must also be examined: To what extent are certain attitudes and values inimical to the development of enterprise ? Or concretely in the case of France, to what extent have the character and mentality of the French financier, industrialist, or merchant been responsible for the relatively retarded status of the country's economy ?

The early modern era witnessed the formation across Europe of centralized states that captured increasing shares of resources as taxes. These states not only enjoyed greater capacity to deal with domestic and external challenges, they were also able to shield their economies better against wars. This article examines the Ottoman experience with fiscal centralization using recently compiled evidence from budgets. It shows that due to high shares of intermediaries, Ottoman revenues lagged behind those of other states in the seventeenth and eighteenth centuries. Ottomans responded to military defeats, however, and achieved significant increases in central revenues during the nineteenth century.

The early history of the American automobile industry provides fertile hunting grounds for theorists seeking corroboration of various, conflicting theories of vertical integration. An examination of the whole history suggests that no single theory always fits the facts perfectly. A complete explanation must combine specific theories in a way that is attentive to such factors as industry life-cycle, demand, economies of scale, and appropriability. If there is any “general” theory, it lies in the set of “dynamic” transaction-cost approaches rather than in the asset-specificity approach now dominant.

Recent literature on the historical determinants of African poverty has emphasized structural impediments to African growth, such as adverse geographical conditions, weak institutions, or ethnic heterogeneity. But has African poverty been a persistent historical phenomenon? This article checks such assumptions against the historical record. We push African income estimates back in time by presenting urban unskilled real wages for nine British African colonies (1880–1965). We find that African real wages were well above subsistence level and that they rose significantly over time. Moreover, in West Africa and Mauritius real wage levels were considerably higher than those in Asia.

The shift from steam to electric power in manufacturing is recounted. Between 1880 and 1930 the production and distribution of mechanical power rapidly evolved from water and steam prime movers with shaft and belt drive systems to electric motors that drove individual machines. The use of electricity reduced the energy required to drive machinery, but more important, enabled industry to obtain greater output per unit of capital and labor input.Reduced energy needs and increased productivity in manufacturing influenced the relationship between energy consumption and gross national product in the first three decades of the twentieth century.

In The concept view of many economists the just price is a nebulous concept invented by pious monks who knew nothing of business or economics and were blissfully unaware of market mechanisms. It is true that certain writers, Catholics and non-Catholics alike, have done their best to accredit this fairy tale and to propagate the notion that the just price, instead of being set by the allegedly blind and unconscionable forces of the market, was determined by criteria of fairness without regard to the elements of supply and demand or at least with the purpose of eliminating the evils of unrestrained competition.

As farm settlement spread westward, area after area exhibited remarkably similar economic and demographic changes, among them, the establishment of a virtually zero growth rate of farm population. At bottom this was due to a shift in farm family fertility from very high to replacement levels, a trend apparent in older areas as early as the beginning of the nineteenth century despite the abundance of good farm land to the west. The principal source of this wholly voluntary adjustment of fertility was the increasing difficulty encountered by farm parents in providing for their children the kind of start in life they would like them to have. Similar pressures may account for other rural fertility declines in the historical past or today's LDC's.

This article estimates the development of manuscripts and printed books in Western Europe over the course of thirteen centuries. As these estimates show, medieval and early modern book production was a dynamic economic sector, with an average annual growth rate of around one percent. Rising production after the middle of the fifteenth century probably resulted from lower book prices and higher literacy. To explain the dynamics of medieval book production, we provide estimates for urbanization rates and for the numbers of universities and monasteries. Monasteries seem to have been most important in the early period, while universities and laypeople dominated the later medieval demand for books.