All sovereign governments face a commitment problem: how can they promise to honor their own agreements? The standard solutions involve reputation or political institutions capable of tying the government's hands. Mexico's government in the 1880s used neither solution. It compensated its creditors by enabling them to extract rents from the rest of the economy. These rents came through special privileges over banking services and the right to administer federal taxes. Returns were extremely high: as long as the government refrained from confiscating all their assets (let alone repaying their debts) less than twice a decade, they would break even.

This article studies slave and other long-distance trades in eighteenth-century France. The data cover 238 ventures from seven French harbors between 1710 and 1780. Using the undiscounted benefit-cost ratio as a proxy for the internal rate of return, the article shows that these investments were more liquid, shorter, and more profitable than private notarized credit, without higher risk. They were safer and had a shorter duration than government bonds, without being less liquid or less profitable. The conclusion, that investment in these trades was preferable to domestic alternatives, may be explained by barriers to entry.

The existing literature on the economy of medieval England views the practice of convertible husbandry as a more efficient alternative to regular common fields. The article challenges this view by measuring the productivities of the systems, which are found to be approximately equivalent. In interpreting this finding, it is suggested that edaphic conditions and wrongful managerial practices account for the poor performance of convertible husbandry during the Middle Ages, whereas the greater productivity achieved by the system in the early modern period is attributed to the introduction of fodder legumes, such as clover, which were absent in previous centuries.

Alexander Hamilton's “Report on Manufactures” (1791) is a classic document of U.S. economic policy, but its fate in Congress is not well known. It is commonly believed that the report was never implemented. Although Hamilton's proposals for bounties (subsidies) failed to receive support, virtually every tariff recommendation was adopted by Congress in early 1792. These tariffs were not highly protectionist because Hamilton feared discouraging imports, which were the critical tax base on which he planned to fund the public debt. As a consequence, protectionist interests shifted their political support from the Federalists to the Jeffersonian Republicans during the 1790s.

During World War II, the U.S. government displaced private investors. According to NIPA data for the period 1942–1945, net private investment was negative $6.2 billion, and net government investment was positive $99.4 billion. Although economists have credited this government investment with various contributions to wartime and postwar economic growth, the bulk of it had little or no value beyond its immediate contribution to winning the war. This episode dramatically exposes a fundamental but false assumption that underlies official data on capital formation: that all expenditures for durable producer goods or munitions form genuine capital. There are circumstances which make the consumption of capital unavoidable. A costly war cannot be financed without such a damaging measure …. There may arise situations in which it may be unavoidable to burn down the house to keep from freezing, but those who do that should realize what it costs and what they will have to do without later on.

Ludwig von MisesMises, Interventionism, p. 52.

Using information on banks' balance sheets, I analyze the causal links between the banking and currency problems in the German crisis of 1931. I find that the crisis had two independent causes: Political shocks triggered a run on the Reichsmark; and the excessive risk-taking by banks that were “too big to fail” led to a run on banks. Due to the high level of foreign debt in the banking system, the run on the currency and the deposit withdrawals reinforced each other in a vicious circle and resulted in a banking panic and the abandonment of the gold standard.

Monetary historians have contended that Free Silver advocates were inflationists seeking debt reduction. We offer an alternative interpretation using a theory of money demand with differential returns on nominal units and a nonoptimum nominal money stock. Our explanation is more logically appealing and more consistent with contemporary evidence. The restrictive coinage laws of the period produced chronic shortages, and our empirical analysis provides clear evidence of these shortages. A shortage of coins valued at a half-day's wage and less, raised transactions costs, produced hardship and spawned protest.

We study the correlates of the monthly establishment wage—the average monthly wage at the establishment level—and changes in wage dispersion between plants using a model of manufacturing developed by Goldin and Katz and data from manuscript censuses of manufacturing. We find that wages were decreasing in establishment size, but increasing in capital intensity and use of steam power. We also find an increase in inequality in the establishment wage between 1850 and 1880. Most of the increase occurred below the median wage and can be attributed, in part, to the growing concentration of employment in large establishments.

It is lovely to see attention to this critical episode in the Great Depression. Isabel Schnabel repeats the familiar argument that bank behavior was a primary cause of the German crisis. We have argued elsewhere that the German crisis clearly began as a currency crisis, not a banking crisis. The purpose of this comment is to examine the data that Schnabel's article brings to bear on this question and evaluate the evidence it presents in support of its hypotheses.

This article presents the first agricultural production function for the eighteenth century, thereby quantifying the effect of many new technologies coming on stream in English agriculture. It shows that some traditional technologies were effective in raising wheat yields, such as drainage and marling; but some innovations of the eighteenth century were much more effective, particularly turnips and seed drills. Environmental factors are incorporated into the model. Climate is shown to be a crucial factor in determining yields but soil quality was much less important. This undermines the accepted argument that England's success was due to a superior natural endowment.

The issue of why productivity growth during the British industrial revolution was slow despite the arrival of famous inventions is revisited using a growth accounting methodology based on an embodied innovation model. The results highlight the relatively small and long-delayed impact of steam on productivity growth even when capital deepening is taken into account. Even so, technological change including embodiment effects accounted entirely for the acceleration in labor productivity growth that allowed the economy to achieve “modern economic growth.”

Ferguson and Temin criticize my article for only paying lip service to the notion of a twin crisis while providing a story of a pure banking crisis. In fact, I have never claimed that the crisis was a pure banking crisis. The question is whether and to what extent banks contributed to the crisis. Ferguson and Temin take the position that the crisis was a pure currency crisis. I argue that weaknesses in the banking sector existed, which interacted with the currency problems in numerous ways. The focus of my article on banks reflects the nature of the question, rather than any view that currency problems were unimportant.

In a well-crafted recent article in this JOURNAL, Robert Fleck argues that voting on the Fair Labor Standards Act (FLSA), the last and among the most contentious pieces of major New Deal legislation, was heavily influenced by regional political differences and by the “southern political system.” This contention is broadly supportive of a view held by several traditional historians, who have argued that political differences between the North and South were a major factor in voting. According to this view, the considerable support for minimum wages among southern workers, African American leaders, and the general public did not translate into congressional votes for the FLSA due to southern political institutions that effectively disfranchised many of the voters who were predisposed to support the FLSA. In a previous article I argued that, although southern representatives were more likely to vote against the FLSA, this was primarily because of economic differences between the two regions, not political factors. I argued that the opposition to the FLSA was spearheaded by low-wage employers, who were disproportionately concentrated in the South. This note examines the reasons for these conflicting results. It is argued that Fleck's approach to prediction, which evaluates the marginal impact of his independent variables individually, but does not jointly consider the variables that defined the southern political system, is misleading, and a more appropriate approach using his own regression results supports my contention that political differences between North and South were inconsequential to the overall roll-call vote on the FLSA. It is shown that, holding economic factors constant, had the South been politically like the North, the estimated roll-call vote on the FLSA would have been very similar to the actual votes in 1937 and 1938.

In the September 2003 issue of this JOURNAL, we provided benchmark comparisons of U.K./U.S. income from 1870 to 1990. In contrast to long-span projections from Angus Maddison and others, our estimates show the United States leading from 1870 in terms of income per capita and output per worker. In a 12-page comment that accompanies our article, Professor Stephen Broadberry criticizes our work on three grounds. First, he charges our estimates are inconsistent with his U.K./U.S. sectoral productivity comparisons. Second, he chastises us on the grounds that our price benchmarks conflict with standard U.S. and U.K. price indices. Finally, he queries our nominal GDP estimates.

Andrew J. Seltzer raises an interesting question: How large was the net effect of southern political institutions on congressional support for the Fair Labor Standards Act (FLSA)? Although Seltzer claims to use my econometric results to show that those institutions had little effect, his interpretation of my results depends entirely on two assumptions that I did not make and that he does not justify. The first assumption is that two variables—the Turnout-Manufacturing Correlation and Turnout—somehow “defined the southern political system.” The second is that southern political institutions caused higher values of Turnout-Manufacturing Correlation. Seltzer's assumptions are theoretically baseless and empirically indefensible, and they lead him to the wrong conclusion. I will explain why.