Over the course of American history and economic development, market activity and the systems underlying and governing this activity have coevolved to address the changing fundamentals of human interactions within the marketplace and beyond. The growth of the American economy and its regulation are deeply intertwined. This chapter discusses these coevolutionary forces in the context of the development of American antitrust laws and the expanding reach of government regulation throughout American economic history. Antitrust and regulation are addressed together because they complement each other in their ability to address ex-ante incentives, primarily through regulation, and ex-post corrections and adjustments, primarily through antitrust suits and related legislative action, that may in turn result in new regulation. The chapter focuses on government regulation of industry in two arenas: price and entry regulation with market power (antitrust issues), and regulation of other market failures, especially environmental, health, occupational safety, and product quality regulation.
The United States Congress created the Federal Reserve System in 1913. The System consists of the Federal Reserve Board in Washington, DC; twelve Federal Reserve Banks; and thousands of member commercial banks. This entry describes the evolution of the system and of monetary policy from its foundation through 2013.
The US economy developed from an agricultural one mired in debt to an engine of growth between 1790 and 1913. The nation’s bourgeoning financial system was at the heart of this transformation. Growing from three banks in 1790 to more than 22,000 in 1913, the United States became the worldwide leader in private banking. This path, however, was not always smooth, and experiments with various forms of money creation and regulation subjected the nation to periodic panics. Despite a number of missteps, the approach led to financial development and monetary stability. We review this history and key research that defines the literature. Topics include early central banking, free banking, the National Banking System, and the founding of the Federal Reserve. We also offer a guide to areas that now generate considerable research interest, including finance and growth, the roles of banks and other intermediaries, crises, and the rise of deposits.
This chapter examines the following questions: How did the institution of slavery pose an insurmountable obstacle to sectional compromise? What were the “economic costs” of the war to the North and the South? How did the emancipation of four million slaves impact the American economy? What was the economic legacy of the war? The chapter argues that the war was indeed what Charles and Mary Beard termed a “Second American Revolution.” The presence of the “slave power” defeated all efforts at compromise. The wartime expenditures and loss of 750,000 men placed an economic burden that lasted into the twentieth century. Emancipation and passage of the Thirteenth Amendment in 1865 were the enduring accomplishments of the war.
This chapter reviews the empirical literature on the expansion of educational institutions and the human capital stock of the United States over the past two and a half centuries. Using evidence on literacy, numeracy, and years of education, it details the remarkable growth of the American human capital stock and discusses trends in racial and gender gaps in educational attainment. The chapter then outlines the development of the educational institutions that facilitated the growth of the human capital stock, discussing the political and social forces shaping the expansion of schools. This overview includes an emphasis on the consequences of the uniquely public and decentralized nature of American schools. Finally, the chapter examines the literature on the decision to attend those schools, considering the roles of the private returns to education, health, family characteristics, and compulsory schooling laws.
This chapter examines the electrification experience in the United States from 1880 to 1960, noting electricity’s effects on manufacturing and agricultural productivity, changes in the demand for worker skills, and changes in household structure. The chapter also discusses how the rise of a new industry led to new regulations and addressed discrepancies in service between urban and rural areas and presents evidence on the current state of research into the effects of these institutional changes on electricity pricing and economic growth. This historical literature can inform the current debate on the impact of large infrastructure projects in developing countries, and of electrification in particular. With over half of the world’s population still yet to acquire consistent access to electricity, these issues remain pertinent to the current policy sphere.
Environmental externalities, although important, have received relatively little attention from economic historians. Air, water, and soil pollution and conservation issues date from the time humans arrived in North America. In some times and places, these externalities were severe. The chapter reviews the literatures on historical pollution and conservation, which were largely written by environmental historians. Because of research interests and available data, American economic historians have traditionally been focused on growth in industrial and agricultural output. Recent research by economic historians on the historical effects of pollution on mortality and on the adaptation of agriculture to climate suggests that environmental issues are now of greater interest.
John Joseph Wallis
Over the last 225 years, government finances in the United States have gone through three distinct stages. In the first stage, 1790–1850, state governments actively pursued policies to promote economic development and financed them from revenues from state investments. In the second, 1850–1930, local governments became the most important level of government, as measured by revenues and expenditures, and revenues shifted toward the property tax. In the third period, 1930 to the present, the national government became the most active and largest level of government, financed through income and payroll taxes, and developed an extensive network of grants to state and local governments. The chapter tracks the changes in sources of revenues and purpose of expenditures, with specific attention paid to military spending over the entire period.
The late nineteenth century witnessed the beginning of a strong, downward trend in mortality in the United States. Economists and others have been identifying and measuring the factors that contributed to these gains in health and to the growth of the healthcare sector over the twentieth century. This chapter attempts to organize and enumerate their various contributions and to suggest directions for future research. Most work falls under one of several strands of research. Public health efforts, innovations in medical technology, and the rise of social insurance and health insurance all play important roles in explaining the decline in mortality, the improvement in health in the United States over the twentieth century, and the growth in the healthcare sector.
Housing finance in the United States has changed considerably since the late nineteenth century. Institutional lenders gradually displaced individual investors, experiments with securitization flourished and then receded, mortgage contracts evolved, and the Great Depression of the 1930s led to nationwide declines in real estate prices, a major housing finance crisis, and the advent of federal government involvement in the residential mortgage market with a slate of new programs. Over the same long period, home ownership has risen, though most of the increase was concentrated in the period from 1940 to 1960, and the quality of the housing stock has improved.