Rothbard on the Economics of Slavery
Abstract: Murray Rothbard wrote an unpublished note in the early 1960s on the economics of antebellum slavery. Essentially, it was a criticism of the methodology of the New Economic History, or cliometrics, of which Conrad and Meyer (1958a) was the breakthrough application, on the topic of the profitability of slavery. Rothbard points out that their procedure in no way supports their conclusion that slavery was profitable or their ideological conclusion that the Civil War was necessary to end American slavery.
civil war — economic history — slavery — cliometrics — new economic history
JEL Classification: B53, N31, N91
Dr. Mark Thornton ([email protected]) is senior fellow at the Mises Institute and serves as the book review editor of the Quarterly Journal of Austrian Economics.
A manuscript was found in the Rothbard Archives titled “A Note on the Economics of Slavery.” It appears to be an unpublished communication concerning an article and comment that appeared in the Journal of Political Economy. Given the dearth of analysis of the economics of slavery in Murray N. Rothbard’s writings and the revolution in the subject matter that was taking place at the time it was written, the manuscript is certainly worth publishing at this time.1 The purpose of this article is to provide the necessary context in which the note was written.
In 1994, I published a paper on the economics of slavery, “Slavery, Profitability, and the Market Process,” in the Review of Austrian Economics, then edited by Rothbard. He had encouraged me to write on the economics of antebellum slavery based on comments I made during an impromptu debate I had with economic historian Robert Higgs at Mises University in the early 1990s.
Not only did Rothbard encourage me to write the article, he guided me with multiple single-spaced pages of references and suggestions. In the process I examined an enormous amount of literature on the economic issues of slavery in antebellum America. It could have easily turned into a second dissertation. However, there was nothing written by Rothbard himself among those recommended sources.
When I was writing, I was well aware of one of the articles that Rothbard commented on in the note. It was a landmark study in the “New Economic History” by Conrad and Meyer that was published in the Journal of Political Economy in 1958. However, I was unaware of the comments by Douglass Dowd (1958) and John E. Moes (1960), which were published in the same journal. The second comment is the direct subject of the Rothbard note. Conrad and Meyer published two revealing replies to both comments. This literature is reviewed here to provide the context of Rothbard’s note.
We assume that Rothbard’s note was submitted and rejected, if for no other reason, because it would have been submitted more than two years after the original article was published. Also, the “note” would have been the third comment on the article, and no other article in the JPE during this period had more than one published comment. For now, I will note that Rothbard did not bring my attention to either the Moes comment or his own note during the process of researching, writing, or publishing my 1994 article. Both would have been helpful, welcome additions to my research. Moes (1960) argues against the seminal article by Conrad and Meyer, a precursor to the classic and highly controversial work by Robert Fogel and Stanley Engerman, Time on the Cross (1974). Rothbard supplements Moes with a more theoretical commentary. It is worth noting here that the Conrad and Meyer (1958a) article was the epicenter of a methodological revolution in economic history.
The Conrad and Meyer article is an attempt to establish whether or not antebellum slavery was in fact profitable. At thirty-five pages, it is an empirical analysis of the available data, much like an historical accounting exercise with the assistance of economic modeling. This article marks the very beginning of cliometrics, a.k.a. the New Economic History, in which economic history would be studied primarily using models and statistics. It was a revolution that would eventually sweep the field of traditional economic history.
Conrad and Meyer’s article is an effort to measure the ordinary profitability of slavery using an economic, as opposed to an accounting, formula of profit. In addition to the revolutionary method, the article confronted a critical ideological issue at the time: can the American Civil War be justified? Was slavery inefficient and unprofitable and would it have soon died off, making the American Civil War unnecessary? Or, was slavery efficient and profitable, thus necessitating, or at least justifying, the war? Rothbard represents a view that slavery is narrowly profitable (due to external forces) but inefficient and could plausibly and quickly wither away.
Conrad and Meyer begin with a production function for slave-based agriculture (i.e., cotton) and a production function for slave breeding as the joint product of slavery. They then bring together various data to examine the cost and the value of slave production in terms of cotton and slave breeding. They conclude that the joint product of slave labor in terms of crop production and slave breeding exceeded the returns on alternative investments and therefore that slavery was profitable.
That they find that slavery was profitable is not surprising, as any ongoing risky business should produce an ongoing positive return. This would be especially true in an expanding business such as cotton, which along with coal and iron was a primary raw material during the Industrial Revolution! The fact that prices were high and output was rising circa 1849–60 is a strong indication that the market for slaves was not in any kind of long-run equilibrium but instead was experiencing sustained increases due to increasing demand for cotton and other forces.
Their result of profitability is not surprising, because any good, factor of production, or institution that remains in use over a significant period of time must be profitable in some sense. The laws of economics dictate this result. However, in the long-run equilibrium economy, or evenly rotating economy, economic profits should always be bid away.
This might not be true for things that provide psychic income, which offsets the lack of monetary profits, but it is only true until losses consume all the invested capital. Therefore this would not be an equilibrium situation. Or it could be that cross subsidies maintain an unprofitable operation in order to provide support for a profitable operation. For example, the owner of an apartment building might continue to operate an unprofitable laundry service on the premises because it increases the demand for the apartments or generates “good will” with tenants.
But what could the logic be with antebellum slavery? Did the slave owners get some kind of psychic income from slave ownership? Did they enjoy whipping their slaves? Or did they feel some kind of personal obligation to maintain slave ownership? Such arguments have been made about antebellum slavery, including by Moes (1960), but it seems doubtful that under ordinary conditions, such concerns could be maintained for centuries and over multiple generations.
In any case, those arguments fail, because the number of slaves continued to grow. Slave markets continued to grow and were increasingly vibrant and resilient during the late antebellum period. There was also an increasing long-term trend in inflation-adjusted slave prices. This evidence suggests that such psychic reasons could not be an important factor here, if they existed at all.
However, the fact that Conrad a
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