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date: 05 April 2020

Introduction

Abstract and Keywords

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.

Keywords: economic growth, industrialization, economic structure, development, population growth, diversity, capital, labor, property rights, federal system of government, institutions, financial institutions

American economic history is the story of how a handful of struggling settlements on the Atlantic seaboard transitioned into the most successful economy in the world. The growth of that economy involved the production of an ever-larger quantity of goods and services by more and more people. Since output grew at a greater rate than did population, on average each person had command over more output; they grew better off over time. The nation and the economy also grew geographically, ultimately linking the Atlantic and Pacific Oceans and beyond. The US Constitution created a giant free trade zone into which the economy could grow. Over time, markets expanded to reach every corner of the nation.

The result can be seen in figure I.1, which documents the economic growth experienced by the American economy from the first census in 1790 to the end of the twentieth century as measured by the growth of real GDP per capita. Panel A graphs real GDP per capita in dollars. Panel B graphs the same series on a logarithmic scale; the slope displays the growth rate. The growth rate of GDP per capita for 1790–1840 was 0.67 percent per annum, and for 1841–2000 it was 1.89 percent per annum. At the former rate, income per person doubles every 108 years; at the later rate, it doubles every 38 years.

As the economy grew and developed, so did the methods used by economic historians to analyze the process. In the 1950s, a small group of American scholars adopted a new approach to investigating the economic past. That approach had roots dating back to the 1920s, but in the years following World War II, it was an element of a much wider transformation that affected history and the social sciences in general, economics in particular. It was driven by a more mathematical specification of economic theory, by the development of econometric methods, and, perhaps most important, by the coming of the computer. It also led to the unearthing or estimation of new sources of data. Ever more specific questions could be asked of a broader array of subjects. Furthermore, the data provided a laboratory where economic theory could be tested and economic policy alternatives analyzed. (p. 2)

Introduction

Figure I.1. Real GDP per capita, 1790–2000

Source: Carter et al. (2006, series Ca11).

World War II drew a large number of economists into government service and focused their attention on questions of “the long-term growth of national productive capabilities,” as Moses Abramovitz (1989, xii) put it. In the immediate postwar years, there was widespread fear that the nation would revert to the depressed conditions of the 1930s. This led to a surge of interest in the economics of development and a resurgence of work on economic growth, which required both explanation and measurement. Economic historians such as Abramovitz and Simon Kuznets (1966) were among those who played major roles in that effort. Alexander Gerschenkron’s (1952) model of “relative economic backwardness” linked economic growth to institutional structures and past development patterns. In brief, to understand where you were heading, you had to have an understanding of where you had been. Herbert Heaton (1965, 465) noted that in the mid-1950s economic historians were climbing onto the “Economic Growth Bandwagon.”

Interest in economic history has sharply increased in recent years among the public, policymakers, and in the academy. For instance, the New York Times published fifty more articles using the term “economic history” from 2006 to 2010 as it did from either 2001 to 2005 or 1996 to 2000. Thomas Piketty’s Capital in the Twenty-First Century (2014) topped the New York Times bestseller list for nonfiction. Economists trained as (p. 3) economic historians have assumed key positions setting economic policy. For example, Christina Romer was chair of the Council of Economic Advisers during Barack Obama’s first term. The economic turmoil following the market collapse in 2008, calling forth comparisons with the Great Depression of the 1930s, is in part responsible for the surge in interest among the public and in policy circles. The turmoil also stimulated greater scholarly research into past financial crises, the multiplier effects of fiscal and monetary policy, the dynamics of the housing market, and international economic cooperation and conflict. Other pressing policy issues—including the impending retirement of the Baby Boom generation, the ongoing expansion of the health care sector, and the environmental challenges imposed by global climatic change—have further increased the demand for economic history research to provide long-run perspective.

Over and above these external forces, the emergence of new conceptual approaches, methods, and data sources within economic history have contributed to the increased vitality of the field. Understanding how, when, and through which mechanisms “history matters” has become a central concern. Further, it is almost impossible to assess the importance of a factor without supposing its absence in alternative circumstances, which has led economic historians to become explicit about their “counterfactual” hypotheses. In 1993, Robert Fogel and Douglass North were awarded the Nobel Memorial Prize in Economic Sciences for their work in promulgating this work. New work in “causal economic history” seeks to establish the direction of causation between changes in the structure and institutions in the American economy and changes in economic performance. Determining causation is made difficult because of the feedback effects between structure and performance. Often new policies were introduced to improve economic performance, but at the same time declines in economic performance led to the introduction of additional policies. These interactions make it difficult to untangle how effective the initial policy was. A variety of new methods have been developed to help resolve these issues, including the use of “natural experiments,” “quasi-experiments,” and historically informed “instrumental variables.” The goal has been to find aspects of changes in policy that were not developed in response to economic performance to identify the causal relationships. As with many new techniques, these methods are constantly evolving. Economic historians, whether from economics or history departments, colleges of arts and sciences or business schools, use a variety of these methods.

In addition to these new approaches and methods, economic historians have benefited from the recent explosion of new data sources made available online. The five-volume Historical Statistics of the United States, millennial edition, which appeared in 2006, is a basic research tool for economic historians, and all its data can be downloaded http://hsus.cambridge.org/HSUSWeb/HSUSEntryServlet. The increased accessibility (in machine-searchable text) of newspapers, periodicals, reports of state and local governments and business organizations, and rare books now in the public domain promises to revolutionize studies of the US economy before 1922 (after which copyright restrictions may apply). The uses of geographic information system (GIS) and sophisticated mapping software have greatly improved our ability to investigate the effects of infrastructure expansion, environmental disasters, and other economic (p. 4) or social processes with a strong spatial dimension. New searchable patent databases, when subject to state-of-the-art analytical techniques, are transforming our understanding of invention and innovation. Similar advances, pushed by web-scraping software scripts and linking protocols, are occurring in research that matches individuals across different micro data sets. New panels constructed from such techniques have already informed path-breaking studies of life-cycle earning patterns, fertility behavior, migration, and intergenerational mobility. Another wave of eye-opening discoveries has begun to flow from the release of the full 1940 manuscript census, which contains individuals’ names as well as the first complete data on education attainment and labor earnings.1

Population and Health

Modern discussions of economic growth typically focus on the growth rate of real GDP per capita, the growth rate of a country’s annual total output of final goods and services divided by the population of that country. For small changes, GDP growth will equal the sum of population growth and growth in real GDP per person. This is an important relationship to understand because real GDP per person is the customary measure of how well the typical individual is faring in the economy. In the limited resource world described by Thomas Malthus (1798) in which population grew faster than other resources, population growth could actually lead to declines in income per capita due to epidemics, wars, or other crises.

The United States has had an abundance of land and natural resources, ready access to capital, and impressive improvements in technology relative to other countries throughout its history. As a result, population growth has had a benign relationship with GDP per capita. The population has grown from 4 million people in 1790 to over 310 million today, while per capita incomes over the same period have grown from $1,100 to $50,000 (in 2009 purchasing power), or at a rate of 1.7 percent per year. Early in American history, population growth dominated per capita GDP growth in determining the total growth of real GDP, but the situation slowly shifted the other way. Between 1790 and 1820 most of the 4.3 percent rise in real GDP came from population growth of 3 percent per year, as per capita income growth was only 1.3 percent per year. The typical individual fared better in the late 1800s. Real GDP was growing slightly faster at 4.5 percent, but real GDP per capita grew 2.3 percent per year, while population growth slowed to 2.2 percent per year. In the thirty years before the Great Recession of 2008, real GDP growth slowed, primarily because population growth slowed to 1.1 percent per year while real GDP per capita still grew at 2 percent per year (Williamson 2016).

Like many other developed countries, the American population growth rates slowed as the United States experienced a demographic transition in which both the birth rate and the death rate fell, but the birth rate fell faster. The difference, known as the natural rate of increase, fell as a result. Unlike most other developed countries, however, the (p. 5) United States has accepted large numbers of immigrants, and so population growth has remained robust (Cain and Paterson 2012).

High birth rates were one of the reasons that population growth was high before the Civil War in America relative to that in Europe. Blessed with abundant natural resources, American families married at earlier ages and had substantially more children than European families did. As the share of the population in agriculture declined and more people lived in cities, the benefits for families of having children to serve as workers declined and the opportunity costs for women of having children rose. Meanwhile, child survival rates rose, and parental preferences shifted toward having fewer children in whom more resources per child were invested. All four changes contributed to a long-run decline in the birth rate up to 1940. Following World War II, there was a baby boom in which the birth rate rose to a peak in the 1950s that approximated birth rates in the mid-1920s. The birth rate declined again thereafter in part due to development of “the pill,” which gave women much more control over choices about having children. Some scholars have argued that the United States is experiencing a second fertility transition, but it is too early to tell whether the recent decrease in the fertility rate is distinct or simply a continuation of the first transition.

The United States also went through a mortality transition to substantially lower death rates. Infant death rates have plummeted over the past two centuries, while life expectancy at age twenty has increased. Death rates declined with increases in nutrition and the standard of living. In the late nineteenth and early twentieth centuries, better understanding of the germ theory of disease led many cities to improve sanitation—water, wastewater, and solid waste works. These changes and other public health programs that spread information about simple practices, like the washing of hands and better nutrition, led to substantial declines in mortality in urban areas. Economic historians have attempted to estimate the effectiveness of these systems and found that the social investments that financed them were justified.

The decline in death rates was accompanied by an epidemiological transition in which deaths due to the chronic diseases associated with the elderly became more common while those due to infectious diseases became less so. This transition meant that people were healthier over their longer lives. In addition to improving the quality of life, economists have found that better health led to higher income because healthy people are more productive.

After the late 1920s, advances in medical care began to play a larger role in improving health. There were tremendous technological improvements in medical treatment, including the introduction of sulfa drugs, penicillin, antibiotics, more vaccines, and a wide range of new surgical techniques. Access to these new treatments expanded with the rise of private and public health insurance. These dramatic improvements contributed to a sharp rise in health care spending from a relatively small share of GDP in the early 1900s to nearly 18 percent of GDP around 2015 with American governments paying roughly half the costs.

Even as the natural rate of increase in population (birth rate minus death rate) declined over time, growth rates in population did not decline as fast because significant (p. 6) numbers of people immigrated into the country. The immigration not only stimulated population growth; it also led to even faster growth in the labor force. Many immigrants were educated and trained in their home countries before moving to America during their prime working ages. They played important roles in building the nation’s infrastructure and transforming its industrial sector, which expanded during booms and contracted during busts when immigrants returned home. Immigrants provided a flexible labor force that expanded to meet the increased labor demand during booms and contracted when demand fell. The “First Great Wave” (1800–1890) of migrants largely came from western and northern Europe. As the American economy continued to expand, a “Second Great Wave” (1890–1914) poured into the country from southern and eastern European countries. The immigrants discovered that the streets were not paved with gold, but the wages in America were substantially higher than at home. Despite the increases in supply associated with the influx of new workers, real wages continued to rise because the demand for workers rose even faster. World War I and immigration restrictions imposed by the federal government in the early 1920s slowed the flood somewhat until the 1960s. After 1965, migration flows expanded in new ways that have influenced the continuing political controversies over migration policy in the modern era.

The study of population growth and health has benefited from a broad range of new data sets and methods. The Integrated Public Use Microdata Series (IPUMS) hosted by the Minnesota Population Center provides enormous samples of individual households for each of the census years. In addition, a wide range of scholars have unearthed and digitized demographic data for many time periods and in many locations.

There has also been an expansion in the types of data that scholars have been using to study the welfare of Americans with the development of anthropometric history in the 1970s by Robert Fogel and his colleagues. Social scientists have gathered information on heights and weights of military personnel, slaves, prisoners, and a variety of other populations, and then made inferences about the nutrition and health of different populations. Although dominated by genes, the heights and weights of individuals are sensitive to diet, work effort, and disease, while income and its distribution affect the average height within a population. Scholars have found a wide range of evidence concerning the relative welfare of Americans, and they continue to find new records on heights, weights, skeletons, and consumption records that will continue to enrich our understanding of the health and welfare of populations.2

Production and Structural Change

American economic growth of output outpaced that of population, so real GDP per capita increased. That growth has been associated with substantial changes in the structure of production. Employment and economic activity has shifted from the primary sector (agriculture, forestry, and fisheries) to the secondary sector (manufacturing, (p. 7) mining, construction, transportation, and so on) and then to the tertiary sector (services). Figure I.2 reports the share of the labor force in each of these sectors at census years.

Introduction

Figure I.2. Sector shares, 1800–2010

Sources: 1800–1900 (1930): Carter et al. (2006, series Ba 814–830); 1910–1990 (with 1930 interpolated): Carter et al. (2006, series Ba 652–659); 2000 and 2010: US Bureau of Labor Statistics, “Employment and Earnings Online,” January 2011 issue, published March 2011, http://www.bls.gov/opub/ee/home.htm and http://www.bls.gov/cps/home.htm, Table 619.

The sources of structural change are manifold. One set of sources arise from the demand side. The demand for food, according to Engel’s Law, increases with rising incomes but at a slower rate. In economists’ language, the income elasticity of food demand is less than one. On the one hand, this implies that in a growing (closed) economy, the agricultural sector will grow more slowly than the economy as a whole. On the other hand, the service sector is generally thought to produce “superior” goods; their income elasticity of demand exceeds one. This implies that as the income per capita rises, the service sector will grow disproportionately fast. A further set of sources for structural change arise from the supply side, from differential productivity growth. Goods and services experiencing more rapid productivity growth generally become cheaper. A “new good” might be considered the extreme case; the product was previously rare to the point of nonexistence, infinitely expensive, and now is available for consumption or use. In general, productivity growth means fewer resources are required to produce one unit of the good.

How differential productivity growth affects sectoral size—for example, its share of employment—depends on the interaction of supply and demand. If demand is highly responsive to price (the product is price elastic), then the sector will grow, and employ more resources, as technological progress makes its products cheaper. If demand is unresponsive to price (i.e., price inelastic), then the quantity demanded will not experience much growth with technological progress. The sector will feel pressure to release labor and other inputs, which can be economically painful. Factor returns in contracting sectors may fall behind those in expanding sectors. Structural change is often disruptive and challenges previously held beliefs about the normal order of things.

(p. 8) The history of US agriculture represents an example of these forces at play. Technological changes including biological innovation and mechanization have allowed a smaller number of farmers to feed a growing population. In 1790, roughly 95 percent of the US population resided in rural areas and most worked on farms. By 2010, the farm share had fallen below 2 percent. The decline was especially pronounced in the twentieth century. There was what has been described as a “farm crisis” during the Great Depression of the 1930s, and the federal government responded with a number of policies that continue to impact farmers and consumers today.

Over the past two hundred years, industrial expansion has been 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. As a result, this sector grew to account for sizeable shares of output, employment, and trade. Manufacturing activities generally experienced faster rates of productivity growth than the economy as a whole, and its laborers were often paid higher wages. Manufacturing also contributed material and technology for military purposes. For these reasons, policymakers and the public have long viewed manufacturing as having greater importance than other activities. It is common to use the term “Industrial Revolution” for three major periods. The first (1810–1860) especially impacted the textile industry. It witnessed the development of many machines, new modes of power, and the rise of the factory. The second (1870–1920) was focused on the electrical and automotive industries; the third (1970–present) is the result of the electronics industry.

Growth accounting has decomposed the expansion of output into the portions attributable to productivity growth and to expansion in the factors of production. Although manufacturing output fell substantially during the Great Depression, the decade of the 1930s has been termed “a great leap forward” by Alex Field (2011), a leading scholar of manufacturing productivity growth. Manufacturing today is shaped by several key forces, such as globalization, the spread of information technologies, and deindustrialization.

The service sector, which includes a broad collection of heterogeneous activities, has grown to be the largest economic sector; it now employs over 80 percent of the American labor force. The growth of services began earlier and increased faster in the United States than in many other countries. The growth of this sector is related to other key changes, including the expansion of education, the entry of women into the paid labor force, variations in the extent of self-employment, and the changing role of foreign trade.

The sectoral shift in economic activity from agriculture to manufacturing and then to services was matched by structural shifts in the location of production from farms to factories to offices. Similarly, single proprietors working in small shops with family or a few hired laborers at the time of the American Revolution have grown into today’s corporations. While proprietorships, partnerships, and corporations are not the only organizational forms available to business, they are the ones that have proven the most important. In particular, the corporation in the United States has grown from the common law model, which implied a special relationship with government (e.g., a (p. 9) bank or a bridge company) to today’s large vertically integrated conglomerates serving global markets.

As the corporation evolved, the legal and institutional context of “big business” enterprises emerged. The resulting large capitalistic enterprises have become controversial not only as businesses but also for the executive compensation they offer. Compensation sharply declined during World War II, then fell more slowly in the late 1940s. These patterns are in line with the general decrease in wage inequality during the period that Claudia Goldin and Robert Margo (1992) call the “Great Compression.” From the 1950s to the mid-1970s, executive compensation increased slowly (by less than 1 percent annually), but then accelerated beginning in the mid-1970s (growing about 10 percent per year in the 1990s). The expanding gap between the pay of corporate executives and that of the median employee has been an important contributor to rising income inequality in recent decades. The distribution of income depends crucially on the markets for the factors of production.

In recent years, there has been an explosion of interest in the economic history of income and wealth inequality and social mobility. The work of Thomas Piketty and Emmanuel Saez (2003) has highlighted the resurgence after the 1980s of the income shares of the top 10 and top 1 percent of Americans to the levels prevailing before World War II. Other important research (Long and Ferrie 2013; Lindert and Williamson 2016) is appearing in the area (fig. I.3). With new matching techniques, scholars are building samples to investigate intergenerational mobility rates. The area is very active, and many findings remain controversial. Interesting new work that will revise our understanding of the past appears regularly.

Introduction

Figure I.3. Income shares of top earners, 1913–2009

Sources: Piketty (2003). (Longer updated version published in Atkinson and Piketty (2007), tables and figures updated to 2015 in Excel format, June 2016.)

One related set of topics where economic historians have consolidated knowledge in the last three decades are trends in earnings ratios by gender and race. In path-breaking work, Claudia Goldin (1990) documented that in the early period (circa 1820), when agriculture dominated the US economy, the full-time earnings of women were about (p. 10) 30 percent of those of men. With the American industrial revolution, employment opportunities opened up where women could earn about one-half of what men were paid. Data improved over time, allowing Goldin (1990, 62, 64) to document the closing of the gender gap associated with the growth of the clerical sector. The earnings ratio rose from 0.46 in 1890 to 0.56 in 1930. The Great Depression and World War II witnessed a further closing of the gap, but the gap widened again in the 1950s. From the late 1950s through the early 1980s, as massive numbers of married women entered the paid labor force, the ratio of full-time female-to-male earnings was nearly constant at 60 percent. After the early 1980s, the ratio resumed its rise. The ratio climbed to just under 75 percent by 2000. The recent closure is explained in part by the continued growth in the educational attainment of women and stagnation or retreat in that of men. Goldin (2014, 1091) has called the convergence of the economic roles of women and men among the “grandest” social advances of the past century.

Economic historians have also devoted careful attention to documenting and analyzing racial income differences. The black–white income ratio in 1940, when reasonably good data first become available, was around 35 percent. The differences were due to: (1) the concentration of African Americans in low-earning regions and in lower-earning occupations, (2) lower levels of human capital (schooling), and (3) wage discrimination on the job. A lively debate rages about the relative importance of these causes. After World War II, the gap closed. In 1975, the black–white income ratio stood at around 62 percent. There has been a vigorous debate about the roles of gradually changing forces, such as the convergence in the stock of human capital per person, versus episodic (or rapidly changing) forces, such as the enactment of anti-discrimination policies. A part of the closure of the gap was surely due to the movement of African Americans out of low-paid employment in southern agriculture. In 1940, 75 percent of African Americans lived in the South, most in rural areas. In 1970, 47 percent of African Americans lived in the region. The change was associated with, first, a compositional shift of the African American population from the South, where their incomes were initially low relative to those of the region’s whites, to African Americans living in the North, and, later, to a rise of black incomes in the South relative to all others. There was little change in the black–white income ratio within the North. As Leah Boustan (2016) convincingly argues, the large-scale movement of southern-born African Americans to the North after 1940 depressed the wages of northern-born African Americans. Since 1975, there has been little further change in the national black–white income ratio.

Changes before 1940 are less clearly understood largely because the national census did not ask income questions and scholars have to rely on smaller surveys separated in time. In 1870, immediately after emancipation, the income of African Americans was about one-quarter that of whites. This afforded African Americans a higher standard of living than that prevailing under slavery, but the main benefits from emancipation appear to have arisen from the freedom to allocate family labor. Robert Higgs (1977) made income estimates in 1870 and 1900 that suggest all of the closure of the racial income gap between 1870 and 1940 occurred in the late nineteenth century and that the early twentieth century witnessed a widening gap. This pattern fits a picture in which (p. 11) the spread of Jim Crow laws and disenfranchisement in the South set back African American economic progress. In important revisionist work, Robert Margo (2016) has re-estimated incomes by race in 1870 and 1900, revealing evidence for more continuous convergence.

Factors of Production

The output of goods and services in any economy is produced by combining the inputs of labor, capital, and natural resources. The existing technology, spirit of entrepreneurship, and methods of organizing production determine how these inputs can be combined into output. An increase in the amount of any input, holding the quantities of the other inputs constant, typically leads to more output. Therefore, total output in the economy can grow just by adding more laborers even while holding capital, land, and natural resources constant. All economies face the problem of diminishing returns, however, such that adding more workers with no change in the other factors, will eventually cause the increase in output from adding each extra laborer to get smaller. If labor expands relative to other inputs relatively quickly, it can lead to the negative consequences that Malthus so eloquently described in 1798.

The United States never really faced this Malthusian dilemma because abundant land and natural resources were available, and the structure of property rights and access to financial markets made it relatively easy to expand the amount of capital. Labor was relatively scarce and, as a result, the colonists had per capita incomes that were among the highest in the world from the beginning. Throughout American history, the number of workers has expanded with the population, yet access to natural resources, capital, new technologies, and methods of organization has expanded even faster. As a result, income per capita has grown.

The labor input is composed of human beings who are the decision-makers in the economy. It is not surprising, therefore, that labor is the input that receives the most attention in economic studies. In the nineteenth century, the labor force typically grew nearly twice as fast as the population as the ratio of children to adults fell and the United States welcomed immigrants. Since 1900, the labor force has grown only about 0.2 percentage points faster than population, as the rise of the share of women in the labor force has been offset by increased life spans and reductions in the number of elderly and males in the labor force. Similar patterns are present in trends in earnings, hours worked, unemployment, the occupational structure, and the demographic composition of the workforce.

A major thread of economic history research on the labor market has been devoted to the study of labor market institutions: slavery, indentured servitude, the rise and decline of unions, internal labor markets, and the broad range of labor regulations as they shifted between the local, state, and federal levels. During the colonial era a significant share of the population came to America as indentured servants or as slaves. Indentured (p. 12) servants from Europe signed contracts in which they chose to trade three to seven years of labor service in exchange for the cost of passage to the New World and payments of land and in-kind goods when the contract ended. The influx of indentures declined as increasing European wages and falling transport costs led to shorter indenture contracts. In contrast, African slaves were sold into slavery; they and their offspring became the property of their owner for life. Slavery was abolished in the northern colonies in the late 1700s, but it remained profitable and thrived in the South. There have been vigorous debates among economic historians about the quality of treatment received by the slaves and, once freed, the short- and long-run consequences of having lived as slaves for them and their ancestors. The abolition of slavery was a significant step forward in the promotion of economic freedom that was consistent with the ideals stated in the Declaration of Independence, Constitution, and the Bill of Rights.

As more people worked outside agriculture in the 1800s, many were hired by employers to work for wages in “at-will” relationships that allowed either side to end the relationship at any time. To gain a collective voice in the employment relationship, a number of workers sought to unionize. Between the 1870s and the early 1930s, most employers opposed these efforts and the ensuing tensions led to strikes and lockouts, some of which turned violent. Labor laws and court decisions set the rules for these interactions until the National Labor Relations Act of 1935 established a right to collective bargaining with an employer when a majority of workers voted to unionize. Private-sector unionization peaked in the 1950s and has declined since, while public-sector unionization has expanded.

Even before unions gained a stronger foothold, employers began establishing longer run relationships with their workers in “internal labor markets,” in which workers had opportunities to move up the firm’s occupational hierarchy as they gained more skills. In the early twentieth-century, employers and unions began to establish sickness and accident funds, a process that became more regulated with the enactment of workers’ compensation laws. Since then, the benefits have expanded to include such items as life insurance, disability insurance, and pension plans. The pension plans promised payments of annual income that allow the employee to retire, typically around age sixty-five. In general, civilian workers in the public sector received such benefits before those in the private sector. Even today, workers in the public sector are more likely than private-sector workers to have pension coverage, and those pensions are typically more generous. Over the past decade, public-sector pension programs have run into trouble because many governments have promised their employees more in benefits than they have set aside to pay for them. Despite decades of knowing a “pension bomb” was about to explode, politicians ignored a problem that is likely to impact public finance for the foreseeable future.

What made it possible for wages and pensions to increase over time is, in part, increases in capital (both physical and human) that prevented diminishing returns to the increases in the amount of labor. The classical and early neoclassical economists viewed capital accumulation as the fundamental driver of growth. In contrast, capital accumulation is assigned a much smaller role by economists informed by (p. 13) twentieth-century growth accounting exercises and growth models developed by Solow and “New Growth” theorists. This now standard view assumes that certain features of the economy have been fixed over time: the rate of capital formation (i.e., the saving rate), the capital–output ratio, capital’s share of income, and the rate of return on capital (i.e., the interest rate). There is reason to challenge the conventional thinking; the role of capital accumulation in economic growth is dynamic and has changed dramatically over the past two hundred years.

Much of the conventional literature focuses on physical capital (plant and equipment), but in the modern service-based economy, the acquisition of human capital has become more important than ever before. To understand the labor market today, it is crucial that one understand how American education evolved and contributed to the economy’s growth. American primary and secondary education, largely supplied by the public sector at the local government level, has been unique among industrialized nations. Regional and racial differences in outcomes are a result of the manner in which education has been provided, and our school systems have been shown to play a pivotal role in perpetuating some of those differences and alleviating others. How education becomes “productive human capital” remains an open question. What Claudia Goldin and Lawrence Katz (2009) term “a race between education and technology” has important effects on the returns to education and the distribution of income.

A final factor helping to explain the high level of American wages and pensions is the abundance of natural resources. When describing how labor, capital, and natural resources are combined in analyses of production, there is sometimes a tendency to treat natural resources as fixed, but American resource abundance was not limited to some fixed endowment set by nature. As Gavin Wright (1990) argues, American natural resources have been “socially constructed” through responses to economic incentives, investments in transportation, and evolving technologies of exploration and extraction. During the nineteenth century, Americans adapted their technologies and consumption patterns toward wood from their abundant forests 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 and investments in knowledge about mining and minerals. The process continues, as the recent booms in American production of shale oil and natural gas demonstrate.

Technology and Urbanization

A significant share of the growth in America’s per capita income came from the development of new technology. Technology has played a major role in the American economy by allowing people and firms to recombine inputs in new ways, enhancing the productivity of each input, extending lives, improving the health of those still alive, and offering a broad array of new ways to enjoy life. As population expanded, improved technologies allowed people to live in larger groups in urban areas, and, in turn, urban living spawned (p. 14) new forms of technology. Urban living led to new arrangements for housing as people began to separate the location of where they lived from where they earned their living. Urbanization also led to new forms of leisure and entertainment, including professional spectator sports.

Economic historians have learned several major lessons about the development of technology. The relative abundance of labor, capital, and natural resources strongly influence the types of technology chosen. In the early nineteenth century, for example, Americans used more labor-saving and natural resource-using technologies. In particular, Americans chose technologies that involved much more wood per unit of output produced than in England because forests were still abundant in the United States, and wood, therefore, was a low-cost input.

As Zvi Griliches (1957) showed in his seminal work on the adoption of hybrid corn, the adoption of a new innovation, the introduction of a new invention to the market, tended to follow an S-shaped curve. When it first appeared, take-up rates were relatively slow. This was followed by a period of very rapid growth before the innovation eventually reached full usage. Further, the prior technology did not necessarily die out. Canals, for example, survived the introduction of the railroad for decades because canal owners found new uses for the canals and lowered freight rates to remain competitive. Continued progress in the prior technology often put a ceiling on the market share at the top of the “S” for the adoption of new technologies.

The incentive structure for invention also influenced innovation. Standard economic analysis suggests inventors will underinvest in inventive activity unless they can privately capture the social returns of their ideas. Patent laws prevent others from copying an inventor’s ideas without permission. There has been a long-standing debate about the appropriate level of patent protection. Patents reward the inventor by providing monopoly returns for the life of the patent, but they are likely to slow innovation because of the higher prices a patent holder can charge. American government sought to find a middle ground by limiting a patent’s life. An influential analysis by Kenneth Sokoloff and Zorina Khan (2001) adds that other distinctive features of American patent law—openness, low fees, priority for “the first and true inventor,” and the ability to assign (sell) the patent—encouraged widespread participation in the inventive process. They also led to the development of a class of professional inventors who sold their output to business firms who then did the dirty work of innovation. In work with Naomi Lamoreaux, Sokoloff (1999) found the professionalization of invention became especially important as the physical and human capital requirements of invention rose over the late nineteenth and early twentieth centuries. Despite the potential gains of patenting, Petra Moser’s (2012) study of the inventions exhibited at international technology fairs (e.g., the 1851 Crystal Palace World’s Fair in London) shows that only a small share of inventions was patented. Inventors and companies have kept many processes secret for fear that releasing information while patenting could aid others in finding alternative ways to achieve the same end.

New technologies come in all shapes and sizes. Nathan Rosenberg (1982) emphasized that a large share of innovation and technological progress tends to come through small (p. 15) changes that accumulate in ways like grass grows. The changes are not easily seen day-by-day but are obvious a year later. Over the past seventy years, for example, the computer has developed from a room-size machine run by vacuum tubes to a more powerful hand-held device with access to huge amounts of information because of thousands of changes in electronics, circuitry, cooling, computer chips, electricity usage, and many other areas.

At the other end of the spectrum, Joseph Schumpeter (1942) emphasized the fundamental importance of innovation, introducing the “Great Inventions,” to disrupting prevailing patterns of economic activity. Timothy Bresnahan and Manuel Trajtenberg (1995) offer a definition of General Purpose Technologies (GPTs), characterized by three features: (1) pervasiveness—a GPT eventually affects most sectors in the economy; (2) scope for improvement—a GPT becomes better over time; and (3) spillovers—a GPT spawns complementary innovations.

Two of the leading candidates for the appellation of Great Invention or GPT in American economic history are the railroad and electricity. Given the large size and low population density of the United States, transportation has always been a vital service connecting producers and consumers. Over time, technological change within specific modes of transportation and competition between water, land, and air modes of transportation have dramatically lowered shipping and travel costs—by over 90 percent in real terms. These changes have both created and diverted trade, promoting economic expansion. The railroad was the major link in this technological chain in the late nineteenth century. At one point in the 1950s, American historians considered the railroad to be a necessity for economic growth in the late 1800s. This view was altered by the simulations performed by Robert Fogel (1964) when he showed that the economy would have arrived at its 1890 output level only about two or three years later had the railroads not been invented. This finding should not be seen as denigrating the contributions of the railroads. Instead, it shows that the railroad was only one of many innovations that contributed to economic growth in an economy as large as the American economy.

The development of electricity and its impact on the economy has been a fruitful area of research over the past several years. First developed in the 1880s, electric power became widespread in urban areas by the 1920s; technological improvements in distribution and programs like the Rural Electrification Administration expanded access to most agricultural areas by 1950. The use of electricity improved manufacturing productivity by allowing companies to eliminate belts and shafts and thus place machinery closer together. The nature of electricity allowed firms to keep the factory cleaner and use less energy. The changes on the factory floor (and later in the office) led to major changes in the skills and organization of the labor force. At home, electricity enhanced household production in the form of refrigerators, dishwashers, vacuums, and washers and dryers, while opening the door to entertainment options such as radio, television, computers, and video games.

Some observers see the late nineteenth and early twentieth centuries as the greatest era of innovation (Smil 2005, 2006; Gordon 2016). Electric power is part of that era. Others (Kurzweil 2005; Brynjolfsson and McAfee 2014) argue the biggest changes are (p. 16) yet to come. One complication, as Paul David (1990) noted, is that it can take decades for the impact of a technological change to be fully realized. This is especially true for technologies such as electric power that operate through systems. David argues that, although electric power was developed in the late nineteenth century, it did not have important productivity effects until the interwar period (1919–1939). The transformations wrought by the micro-processor and personal computer were similarly delayed. The study of economic history provides insight into debates about the future of technological progress.

Technological change often was strongly intertwined with urbanization. New innovations in agriculture allowed more people to specialize in nonagricultural activities, and a broad array of technologies allowed large numbers of people to live safely and comfortably in a small area. Well into the nineteenth century, foreign immigrants and former farmers were attracted to cities in response to a rising urban wage premium as new manufacturing plants enhanced urban productivity. Although this premium fell after 1880, migrants remained attracted to cities as the public health investments improved the urban standard of living. Then, beginning in the 1920s and especially with the completion of the interstate highway system in the 1960s, the urban network began to change with the “rust belt” cities of the North and East losing relative to the “sunbelt” cities of the South and West. Those transportation changes combined with other technological changes and the drop in transportation costs made industry more footloose; employers began to look for places with more amenities. Within metropolises, both households and employers relocated to suburbs. Rising incomes and falling commuting costs explain much of this pattern, but crime and a city’s racial composition are important push factors.

As rural dwellers moved to urban areas, they moved from homes on the farms where they worked to housing that was independent of their workplace. Homeownership rates in cities rose in the 1920s, fell in the 1930s, and then grew rapidly between 1940 and 1960, while the quality of the housing stock improved. Purchasing a home is the largest investment that most people make in their lifetime, and it typically requires the person to borrow to finance the purchase. Until the 1930s, most nonfarm home mortgage loans came through building societies, insurance companies, family and friends, or the prior owner. Thereafter institutional lenders gradually displaced individual lenders. Savings and Loans were the leading lenders from the late 1930s through the late 1980s; then a wide range of investors became involved when mortgages were combined into mortgage-backed securities and collateralized debt obligations in the 1990s and 2000s. Prior experiments with such securitization had taken place in the 1890s and 1920s. Starting with the New Deal, the federal government provided extensive subsidies to markets by purchasing troubled loans and refinancing them, providing loan guarantees, offering tax breaks on mortgage interest, and creating Fannie Mae and Freddie Mac to create secondary markets for mortgages.

As urban areas developed, people had more time for leisure and entertainment. A particularly popular and expanding form of entertainment has been professional spectator sports. Study of the economics of major team sports often captures the (p. 17) imagination of economics students because they have grown up as fans, and the data collected on professional sports can be used to examine a wide range of issues. The amount spent on spectator sports has risen rapidly over time with higher incomes, shorter work weeks, and the development of cable and satellite television. These changes coincided with shifts away from labor monopsony derived from reserve clauses to complex combinations of draft rights and free agency that have led to large-scale increases in players’ salaries. The changes in race relations in American society are mirrored in the markets for labor and sports memorabilia, which have been used to measure the extent to which employers and consumers discriminate against black and Latin American players. Meanwhile, stadiums and arenas have become major public works projects in most cities, and there has been constant negotiation and renegotiation about the extent to which local and state governments should subsidize their construction.

Government and Economic Policy

Douglass North (1981) described economic history as the study of the “structure and performance of the economy through time.” North emphasized that the structure of economies sets the incentives that determine the performance of economic actors, and, in turn, the economic actors often seek to change the structure of the economy. North joined John Wallis and Barry Weingast (2009) in suggesting that the vast majority of economies in history (and even today) were run by a relatively small number of elites who limited access to economic opportunity for the majority of the economy’s participants. This is problematic for those economies because, as Daron Acemoglu and James Robinson (2012) show in Why Nations Fail, there is a strong association between high per capita incomes and better definition and enforcement of property rights, more unbiased rule of law, and better protection for individual freedoms. Building on a legal structure inherited from the British, the United States has long been a leader in all of these areas, starting with the US Constitution and Bill of Rights. The interactions within the governments that followed served to protect property rights and expand access to economic opportunities to a very broad range of the population.

One of the questions North, Wallis, and Weingast (2009) sought to address was: Why would the ruling elites be willing to relinquish their control and give the populace open access to the economy? The American experience was a grand experiment that illustrates the process. The political leaders who attended the constitutional convention were members of the economic elite of landowners, merchants, lawyers, and slave owners. The ocean separating the American colonies from Britain left the colonists relatively free. The Crown and Parliament did not exercise strong oversight of the colonists’ economic affairs, and the abundance of land meant that a significant share of the population owned property. When colonists disliked a policy, it was often routinely violated. For example, high taxes on molasses in the 1730s led to extensive smuggling. In fact, (p. 18) the colonists revolted when Parliament sought to raise colonial taxes to levels still well below those paid in Britain and to tighten control over the economy.3

The Founders attending the 1787 Constitutional Convention and the first Congresses of the new Republic chose a wide range of basic rules for the economy that protected their own property rights, repaid the federal and state debts from the Revolutionary War, and established countervailing powers between the legislature, the executive, and the judiciary. Much of this activity was in their own self-interest, but their interests were also aligned with a large share of the population and matched the reasoning proposed by political philosophers such as Adam Smith and John Locke. There were flaws, such as the protections for slavery and limiting voting rights to property owners, but the decisions created economic opportunities for a wide range of the American public. Decisions made by the national, state, and local governments since that time have further expanded opportunity and political power for many in American society.

The Constitution and private property rights set the basic rules—the United States would have a market economy in which government would have a more limited role than in nearly every other society. Yet, national, state, and local representative governments made a wide range of decisions that strongly influenced economic activity and the rising standard of living. Governments at all levels played a variety of roles, including the enforcement of property rights, provision of defense from external threats, adjudication of disputes, regulation of various aspects of the economy, redistribution of incomes, and investments in public works (e.g., canals, roads, sanitation, and dams). Government spending at all levels rose from about 7.5 percent of GDP in 1902 to roughly 36 percent in the 2000s. The shares of government spending, taxation, and debt for the national, state, and local governments have also gone through major changes that can be divided into three distinct stages. Before 1850, state governments actively pursued policies to promote economic development; they were financed by revenues from state investments in, say, canals. Between 1850 and 1930, local governments became the most financially important level of government, developing and expanding schools, building public hospitals, laying down paved local road networks, and constructing sanitation facilities, among other activities. These were financed largely through property taxes. After 1930, the national government became the most active and largest level of government. It has been financed through income and payroll taxes, while developing an extensive network of grants to state and local governments.

One can see the same shifts between levels of government at the regulatory level, although the timing differed for different types of regulations. The Constitution originally limited the national government’s power over the economy to international trade, national defense, the definition of the dollar, disposition of federal lands, and the maintenance of free trade within the United States. Most of the regulatory power over the economy was left to the states. Regulation of antitrust, safety, labor, railroads, food, and the environment originally developed at the state level or through common law court decisions, while poverty relief was commonly the purview of local governments with state governments playing an increasing role between 1920 and 1930. Between 1880 and 1920, the federal government expanded its regulatory authority over activities (p. 19) involved in interstate commerce—railroads, food safety, and antitrust. During the Great Depression and the New Deal, claims of a national emergency led to the expansion of the federal government’s role in poverty and labor policy. During the early 1970s, there were additional expansions in federal regulation of the environment and workplace safety. However, there was a substantial movement to reduce regulations in banking, finance, and transportation.

Regulation of commercial banking is a particularly fascinating example. The banking system greases the wheels of commerce by creating loans that match savers with investors; it provides access to currency and demand deposits that lower transactions costs and allow more specialization. After 1792, states were not allowed to issue currency, but they were in a position to charter banks, and some states took ownership stakes in banks. Early banks were able to expand the amount of money available by making loans and putting into circulation their own paper notes that were backed by reserves of gold, silver and other assets. Originally, each bank obtained a charter through the state’s legislative process, but in the 1820s states began passing “free banking” laws that allowed banks meeting the state’s regulatory guidelines to open for business.

Until the early 1830s, the national government had an impact on the issuance of state banknotes because it deposited its funds in the First (1791–1811) and later the Second National Bank of the United States (1816–1836), which acted like central banks by following policies designed to keep state banknotes circulating at par value. During the Civil War, the national government began regulating banks and note issues when it created the National Banking System, issued its own “Greenback” notes during the Civil War, and drove many state banks out of operation by imposing a 10-percent tax on all state banknote issues. State banks began to reappear later in the century as new forms of deposit banking developed. In the late 1800s and early 1900s, there were occasional bank panics. Ultimately, a major panic in New York in 1907 led to the creation of the Federal Reserve System (the Fed) in 1913.

The Fed was expected to operate a universal and efficient payments system and promote a market for banks’ short-term loans, known as banker’s acceptances. Through discount window lending, it would create an “elastic currency” that would expand money and credit at seasonal peaks and more generally in response to the needs of business. Early Fed policy was strongly influenced by the “Real Bills Doctrine” and adherence to the international gold standard, which caused Fed leaders to fail to effectively use monetary policy to counteract the rise in bank failures and the sharp drop in output and prices between 1929 and 1933 during the Great Contraction. In the aftermath of this disaster, the federal government expanded its regulatory authority over banks, stock markets, and other financial sectors. In the modern era, the Fed, the Treasury, state governments, and several other national agencies play regulatory roles in the financial system. Following a period of deregulation beginning in the late 1970s, new legislation has led to new regulations in the aftermath of the Great Recession of the 2000s, regulations that are still being determined by the agencies administering the law.

The national government has maintained its authority throughout American history in two key areas: international trade policy and national defense. International trade (p. 20) has been a small but important part of the US economy, rising from about 6 percent of GDP in the late 1920s to around 14 percent in 2012. The Constitution gave Congress the authority to levy import duties, and these were a significant source of national government revenues before the income tax. The use of this power has been extremely controversial ever since, with the political debate revolving around whether tariffs on imports should be high or low. This debate has pitted export-oriented producers against domestic producers facing foreign competition. The vast majority of economists suggest the benefits to free trade and globalization for those who gain from greater trade exceed the costs to those who lose. After passage of the Smoot-Hawley Tariff Act of 1930, protectionism acquired a bad name, and the United States began to turn to reciprocal trade agreements with individual countries. This led to the formation of the General Agreement on Tariffs and Trade in 1947 and later agreements such as the North American Free Trade Agreement in 1993.

National defense, during peacetime, has accounted for roughly 3 to 5 percent of GDP in most years. However, major wars have always led to huge expansions in federal expenditures, taxes, national government debt, and inflation. The parabolic trajectory of production during wartime is similar for all major wars. Since one never knows how large a war one is about to fight, the first step is to work as hard as you can as fast as you can. Production rises. At some point, the needed amount of war material becomes known, and production slows to whatever pace is required. Then, as the end approaches, war production slows as the economy begins its reconversion to peacetime. In addition, most wars have led to forced savings, so the aftermath of the war is a buying spree that inevitably creates a sudden boom and collapse. The resulting upswing brings the return of normal peacetime conditions.

Arguably the most important, and certainly the deadliest, war in American history was the Civil War in the early 1860s. The primary economic issue was slavery, and the war continued because the North refused to allow the United States to break apart. The largest change wrought by the war was the emancipation of four million slaves. Southern labor institutions changed, but the ex-slaves still struggled because they started with virtually no education and few resources. Their incomes grew substantially as they and their descendants gained more skills, more property, more education, and migrated to new areas, but the low starting point still has an impact on relative black and white earnings today. The economic costs of the war, including the amounts spent by both sides and the deaths and injuries, have been estimated to be in the neighborhood of one year’s GDP. Had that amount been used for a negotiated buyout (compensated emancipation), it could have paid the 1860 peak price to the owners for each slave, given each slave family 40 acres and a mule, and paid the slaves about one-fourth of a year’s GDP in back pay. Compensation emancipation likely would have enhanced the economic welfare of ex-slaves and their descendants.

Of the two world wars of the twentieth century, World War II had much larger effects on the economy. The United States had just returned to its long-run growth trajectory as America entered the war, in part because of Allied demands for war materials. To fight the war, the federal government instituted many features of a command economy, (p. 21) devoted nearly 40 percent of the economy’s resources to the production of military hardware, and pulled nearly 17 percent of the labor force into the armed forces. As a result, massive amounts of munitions were produced. The United States and its allies won the war, but both victories came at a cost. Many American saw their consumption limited by rationing; normal investment activity was sharply reduced; and there were significant losses of life and limb. World War II led to gains for women who showed that they could perform a larger range of industrial tasks and for minorities who often migrated to better opportunities after the hard times of the 1930s. Overall, the war decreased wage and wealth inequality.

Robert Higgs argues in Crisis and Leviathan (1987) that the crises of the two World Wars and the Great Depression contributed to large-scale expansions in the role of government in the American economy. The institutions created to manage World War I reappeared during the Great Depression and again in World War II. Each new crisis ratcheted up government’s influence on economic activity during the crises. When the crises ended, government controls decreased, but not to pre-crisis levels.

The New Deal was the federal government’s 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 public assistance programs that are still in place today. Even though government spending expanded after 1929, the impact was stunted by a major increase in income tax rates and those on a wide variety of goods and services. When Roosevelt took office in 1933, monetary policy became more expansive once we left the gold standard. While government spending continued to increase during the New Deal, tax revenues were raised nearly as fast, so there was no true Keynesian attempt to stimulate the economy. In fact, attempts to balance the budget and an increase in reserve requirements to prevent inflation contributed to a second downturn in 1937–1938. The New Deal created dozens of programs to try to solve numerous specific problems. Recent research suggests that the most successful were the emergency relief and public works programs and the Home Owners’ Loan Corporation. While these generally stopped the downturn, they did not lead to an economic upswing. The policies of the National Recovery Administration and the Agricultural Adjustment Administration are more controversial and may have done more harm than good.

The New Deal introduced a wide range of permanent changes in poverty and social insurance programs with the Social Security Act of 1935. These changes, and the attempts to provide more security since then (e.g., unemployment insurance, workers’ compensation, and Medicare), have been a major part of the rise in government spending over the last one hundred years. The safety net from colonial times through the 1920s was composed of transfer programs run by local governments and private charities. State governments joined in by funding mothers’ pensions and requiring workers’ compensation after 1910. Beginning with the New Deal, the safety net grew much larger, dominated by social insurance programs run by different mixtures of the federal and state governments as well as private charities.

The federal government policies most commonly discussed in the press are fiscal and monetary policies targeted to smooth fluctuations in the macroeconomy and to (p. 22) limit inflation. The Employment Act of 1946 made macroeconomic policy a federal responsibility with a charge to “promote maximum employment, production, and purchasing power.” Since then there have been extensive debates among macroeconomists about the success of monetary and fiscal policy. Early debates between Keynesians and Monetarists centered on whether fiscal or monetary policies were more effective. Once rational-expectations macroeconomists began to address issues relative to information and policy lags and the economy experienced a combination of high inflation and high unemployment in the 1970s, the debates centered on whether macroeconomic policy could do anything more than adjust inflation in the long run and raised the question of whether the macroeconomic policies were more likely to stabilize or destabilize the economy. Macroeconomists still address this issue today, but they use different tools. Real business cycle analysis uses dynamic structural models of the economy that simulate the impact of policies. Meanwhile, neo-Keynesians and other economists use econometric models to estimate the relationships between policies and outcomes.

With the Kennedy tax cut of 1964, and continuing after the Fed reduced money supply growth in the early 1980s following the “Great Inflation” of the late 1960s and 1970s, the United States experienced long expansions and short recessions through around 2007. Housing prices soared in the 2000s, fueled by a mixture of a bust in technology stocks around 2000, loosened Fed monetary policy, increases in sub-prime lending associated with government policy to expand homeownership, and incentives created by sales of loans to institutions that marketed mortgage-backed securities. The Great Recession of 2008–2009 ensued. The federal government appreciably expanded the deficit to 10 percent of GDP in 2009, and the Fed rapidly expanded open market operations, bought mortgage-backed securities, and offered credit to other firms. Since then, the Fed has kept short-term interest rates near zero, while the deficit has slowly declined. Economic growth has been slower than in previous recoveries. Even as the economy recovered, fears have been expressed that the United States has moved into a new era of slow growth, although many economists believe this is just a short-run malaise.

Conclusion

With the coming of the computer, economic historians have uncovered large amounts of new quantitative and narrative evidence that have advanced our understanding of the past and the modern world. Scholars young and old have explored new avenues for research that have revealed dimensions of the American economy that few had realized were important. They have described newly uncovered data, new methods for analyzing that data, and new avenues for research that will add to the richness of American economic history. We expect the coming decades to offer a rich cornucopia of new insights.

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Notes:

(1.) See the Economic History Association Symposium (2015). The US population is becoming increasingly diverse, and economic historians will need to employ categories and metrics that go beyond simple binary divisions such as native- and foreign-born, white and nonwhite.

(2.) For an example of such international comparisons, see the recent volume of surveys from around the world edited by Joerg Baten (2016) that includes many anthropometric comparisons.

(3.) For book-length summaries of the development of government in the United States, see Fishback et al. (2007) and Hughes (1991).