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.
This chapter summarizes historical evidence on the link between patent laws and innovation. Earlier historical analyses have emphasized the importance of patent laws in encouraging innovation. Data on exhibits at international technology fairs, such as the 1851 Crystal Palace world’s fair, however, indicate that only a small share of innovations are patented and that non-patent mechanisms may play an important role in encouraging innovation. They also show that inventors’ dependency on patents varies strongly across industries, so that radical changes in patent laws may influence the direction, if not the level, of technical change. Exhibition data also indicate that patents may play an important role in facilitating the diffusion of innovative activity by encouraging inventors to advertise their ideas. These results highlight the need for additional analyses of innovation that systematically analyze patents and alternative measures of innovation.
Louis P. Cain, Price V. Fishback, and Paul W. Rhode
This introduction offers an overview of the research discussed in the 37 chapters in the Oxford Handbook of American Economic History. It discusses the path of economic growth and development and the methods that economic historians have used to measure and analyze them. Over the last 300 years population growth has slowed, and the population has lived longer and healthier lives. The economy has shifted from predominantly agricultural through a major industrialization period into a service-based modern economy largely located in urban areas. Per capita incomes have grown largely through increased productivity from improved technologies, better education, improved organizations of processes, and governments that established private property rights, rule of law, and protections of individual freedom. Capital aspects of the economy have varied more than commonly known, and financial institutions have gone through several innovations as their regulatory regimes have waxed and waned. A diverse population of men, women, ethnic groups, races, and ages played major roles in labor markets. Labor market institutions changed with the elimination of slavery, the development of “at will” contracts, internal labor markets, and changing treatment of collective bargaining. In the federal system of governments, states were initially the dominant actors, followed by local governments in the late nineteenth century, and then an expansion of all governments and the national government in the last hundred years, partially in response to the major crises of the World Wars and the Great Depression.
Changkeun Lee and Paul W. Rhode
Over past 200 years, industrialization was the driving force in the economic development of most nations experiencing “modern economic growth.” Industrial activity generally expanded faster than the economy as a whole, and the sector grew to account for sizable shares of output, employment, and trade. Manufacturing activities have generally experienced faster rates of productivity growth than the economy as a whole and the sector has often paid higher labor wages. Manufacturing also contributes materiel and technology for military purposes. For these reasons, policymakers and the public have long viewed manufacturing as being of greater importance than other activities. This chapter surveys growth and structural change in the American manufacturing sector over the past 200 years. It chronicles the sector’s transformation during the first (1810–1860), second (1870–1920), and third (1970–present) industrial revolutions. It examines the forces, such as globalization, information technologies, and deindustrialization, shaping the sector today.
This chapter surveys the role of natural resources in American economic history, from colonial times to the present. The central theme is that natural resources do indeed have a history: to a very considerable degree, American resource abundance has been “socially constructed” through responses to economic incentives, investments in transportation, and development of technologies of exploration and extraction using advanced forms of knowledge. During the nineteenth century, Americans adapted their technologies and consumption patterns toward wood to an extent unmatched in the world at that time. The country’s rise to world leadership in minerals was not based primarily on geological endowment, but on an accommodating legal environment, expansion of the infrastructure of public knowledge, and investment in higher mining education. Recent American developments in shale oil and shale gas confirm the historical generalization that natural resources are not given by nature but by policy choices and human behavior.
Price V. Fishback
The New Deal was a response to the Great Depression of the 1930s. The Roosevelt administration built an incredible array of public works and established a series of regulations, government insurance, and poverty programs that are still in place today. This chapter examines the research in the last two decades on the monetary and fiscal policies of the New Deal; the public choice aspects of the distribution of New Deal funds to states, cities, and counties; the state income multiplier; and the impact of specific New Deal programs on a wide range of other socioeconomic outcomes. In the process it describes anticipated directions for future research.
Stanley L. Engerman
This chapter presents several of the major issues of analysis in certain of the major spectator sports. It focuses, among the professional sports, on baseball, football, basketball, and ice hockey—particularly on baseball, which has a much longer history and a more substantial literature than do the other sports. While each of these sports leagues is operated as a separate entity, there is a great degree of similarity in their actions and activities. The chapter does not cover all economic aspects of sports, but focuses on those considered most significant. The four major economic issues to be discussed are (1) the economics of cartels; (2) the labor market (the institutions and the behavior of labor markets); (3) racial and gender discrimination in sports; and (4) government subsidies to teams to influence their location.
This chapter examines the development of private property rights to natural resources in the United States as a bottom-up or top-down process. Long-term equity and efficiency effects are highlighted. The role of property rights in avoiding the tragedy of the commons is illustrated. The property rights examined are those to farmland, timberland, as well as grazing rights and mineral rights. Each emerged or were constrained in different ways with important long-term economic and social effects in American economic development. The role of the rectangular survey in deliminating rights to surface land to reduce tenure uncertainty and to promote land and capital markets is described in detail.
This chapter documents and analyzes the American historical economic record of growth and business cycles within the context of long-run and short-run economic policy changes. The United States is unique among all of the developed countries in terms of having a sustained and fairly stable record of economic growth. Given the large changes in various policies that have occurred over time, this record suggests that policy shifts have had almost no impact on the growth rate over the very long run. However, policy changes have had a significant impact on economic activity over shorter horizons, including the Great Depression and World War II. This chapter also argues that microeconomic policies, such as regulatory policies, tax policies, and labor policies, have had as much of an impact on aggregate economic activity as macroeconomic policies, such as monetary policy and government spending and transfer policies
Stephen N. Broadberry, Louis P. Cain, and Thomas Weiss
This chapter chronicles the transformation of the US economy to one where over 80 percent of the labor force is employed in the service sector. The initial section discusses the difficult task of defining services—the service industries as opposed to the service sector. The growth of services began earlier and increased faster in the United States than in other countries. The discussion of this growth is divided into sections on the nineteenth and twentieth centuries. The roles of education, the entry of women into the labor force, self-employment, and foreign trade are discussed. The final section concentrates on services’ role in the comparative productivity performance of the US, UK, and German economies.
This chapter reviews the evolution of US foreign trade and trade policy from the colonial period to the present. International trade has been a small but important part of the US economy throughout the country’s history. The Constitution gives Congress the authority to levy import duties. The use of this power has been extremely controversial ever since, with the political debate revolving over whether tariffs on imports should be high or low. This debate has pitted export-oriented producers against domestic producers facing foreign competition. After the Smoot Hawley tariff of 1930, which coincided with the Great Depression, protectionism was given a bad name and the United States began to turn to reciprocal trade agreements with other countries. The led to the formation of the General Agreement on Tariffs and Trade (GATT) in 1947 and later agreements such as the North American Free Trade Agreement (NAFTA) in 1993.