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Be able to give an example of how we can learn from economic history in order that we do not make the same mistakes.

Bernanke saw that government didnt do enough in great depression and people suffered more than they should. Now government printing money to help economy get back faster. We also have a lender of last resort, the feds back up banks in the event of panics

1. Be able to define cliometrics and give an example of where it has been used in the course.

Use of economic theory and statistical measurement in study of economic history Find factors that were most important in achieving the result we see in history. (What was it that set us up? Was it taxes, French-Indian War etc.). -Technique and statistical measurements to determine the factors are the same but economists belief varies.

1. Be able to discuss the decline in income per capita in the South relative to the Midwest after the Civil War. You should be able to discuss the various theories regarding the depth and duration of this decline (War destruction, Efficiency Loss (Fogel and Engerman), leisure for labor trade-off (Ransom and Sutch), Debt Peonage (Ransom and Sutch), Regional Labor Demand (Gavin Wright), Temins discussion of the cotton market, and the impact of hookworm (Brinkley)).

South income per capita relative Midwest: 1840 (Over 110%), 1860( over 100%), 1870(75%), 1880-90(50%) War destruction: Transportation rebuilt quickly, southern manufacture output reached pre-war levels by early 1870s, Capital did not seem to be scarce (we dont believe war destruction did it) Efficiency loss (Fogel and Engerman): Sharecropping replace plantation farming after war which was less efficient => decrease in productivity (would not work long or hard if knew landowner gets half disincentive effect. Plantation very efficient (run as factory w/ division of labor) Sharecropping could not be this efficient. They did not have scale ( large plantations). => This change we believe did lead to efficiency losses. Leisure of labor trade-off (Ransom and Sutch): Workers will choose more leisure now that they have choice. They calculate 28-37% per capita reductions in work hours. Note: Not true loss of output, decreased leisure => decreased utility, but we do believe. Debt Peonage: Sharecroppers and other small farmers got caught in cycle of debt where they were trapped on one plot of land under one landlord.*Problem with argument (Saw agriculture labor move a lot within south) Regional Labor Market and Cotton Demand (Wright): Four decades before civil war, growth in cotton demand 5%/year. Four decade after civil war growth in cotton demand was 1%/year. They put all their eggs in cotton basket thus reduction in demand growth. cotton => fall in wages Combining various arguments regarding cotton (Temin): Combines a loss in demand (outlined by wright) and a loss in supply (as a result of decreased leisure seen by Ransom and Sutch) to show how cotton market change left to fall in

income per capita

A~> B gives correct conclusion Hookworms: Southern soldiers didnt have shoes, so estimated 40% of population had hookworm (made them weaker and skinnier, not productive) Bad health => less productive population => poverty

1. You should also be able to use the signaling model to discuss the persistence of racism. How does racism delay growth? How did the government help promote racism and therefore delays in growth? Be able to discuss and define the Black Codes and Jim Crow laws.

Racism persistence: Ransom and Sutch argue discrimination can persist when race signals productivity. Using signaling model where race indicates average productivity, ex-slaves who could farm successfully were not given loans or tools necessary to be as productive as they could of been.

New South Movement to get industry to South marketing campaign to get capital. Black Codes: Plantation system( Black code) -> wage labor, uniform wage(1/3, 1880)-> sharecroppers(1/2,1880): tight control Jim Crow Laws: racial segregation in all public facilities

1. How did the 1933 National Industrial Recovery Act and the 1938 Fair Labor Standards Act and the New South Movement finally end the disparity in income per capita and lead to wage convergence?

1933 National Industrial Recovery Act and 1938 Fair Labor Standards Act- Established higher wages ~> Massive unemployment in South ~> Labor migration from South to North

1. How did the crop mix change across the U.S. during the post-Civil War period?

Crops: Regional Specialization by 1900. Hard spring wheat in Northern plans & Minnesota, Winter Wheat in South (Illinois, Kansas, Oklahoma) in between corn belt. Kept diversity on farms, not growing only a single crop.

1. How did the balance between tenant farming and farmer owned farming change in the period after the civil war?

Tenancy vs. Ownership with expansion of output onto new lands: In Northern agriculture, in 1800, 25% tenancy rate. More tenancy in Midwest than East. 1880- 1900 Western

part of the Midwest, tenancy ^50%. Iowa 1880 25% tenants, 1930 50% tenants. *Final research indicated that more farmers stayed tenants with land expansion. 1. How did the integration of the Midwest into the world market for grain affect farming in the U.S.? Timeline: 1850s- US grain market expansion overseas 1854-56- Crimean War ~> Decrease European demand for Midwest wheat ~> price wheat decrease Late 1870s- Transportation network developed enough to have very low transportation cost. Very inexpensive midwestern wheat in Eastern US market and European market. 1870-92- Wheat exports grew four folds, agriculture exports in real terms, 1913 dollars decreased from $248 million to $986 million %4 1875-79 (50% grain in East coast produced themselves)(Britain 41%) 1910-1913 (East Coast 23%)(Britain 27%)

Overall Trends: 1870-92 Wheat exports grew FOURFOLD, agriculture exports in real terms 1913 dollars from $248 million to $986 million % of grain in E. coast that they were producing themselves in 1875-79: 50% by 1910-1913: 23% % of grain in Britain that they were producing themselves in 1875-79: 41% by 1910-1913: 27% 1. How did the Crimean War affect farming in the U.S.?

The Crimean made less demand for US wheat, so wheat production decreased (incorrect)

1. What were the problems that small farmers believed to be important? How valid were each of these complaints and why?

Land prices were rising (true), so less land available. Improvement have been made to land, decreased demand, change in locational advantage. If not a tenant then usually had mortgage (true), only shortterm balance loans available. No long-term decisions were made until a history was established Foreclosures (If crop didnt go well, lost farm): did not seem huge, however pockets of communities were hit very hard when a season was bad. Railroads (not valid complaint): RR charged monopoly prices and took advantage of small farmers. Small farmers no other option. Bigger farmers had quantity discounts. Small routes, though short, charged more in order to make up for RR losses in other lines Commodity prices were falling in post civil war period. All prices were falling in economy. Farmers actually had more purchasing power than before. Money Lenders and land speculators: Claims- high interest on farm mortgages => farm foreclosures. Land speculators => inflated land prices + taking money from hardworking farmers. Reality: Markets were not competitive and on average competition and rent were not too high. Overall, some farmers were facing some or all these problems. In General, industry not hurt. Movement could be spearheaded by an individual with valid complaints. Was

more expensive to farm in post civil war period. (???)They were part of global market for grain which led to uncertainty. 1. How did farmers react to these problems? Why is the establishment of the national grange of the patrons of husbandry important?

National Grange of the Patrons of Husbandry: Created December 1867. Force in Politics. Beginnings of Populist Campaign of 1890s. Challenged political parties. Lobbied for solutions to problems forced by farmers.

1. What were the inventions that mechanized agriculture?

1857- Deere turned out 10,000 plows 1851- McCormick 1,000 mechanical reapers/year 1850 Marsh Harvestor 1874- Patent for barbed wires 1892- Gasoline tractor => adoption was slow (up then down)

1. How did the adoption of mechanized farming affect productivity growth in agriculture in the 20th century?

Looking just at tractor 1910-1960: replaced about 23 million draft animals. Decreased effective cropland base by 79 million acres. Decreased area if pastured land by 80 million acres. Decreased timeliness and quality of farmwork. Decreased crop yields. Reduced labor requirement by 1.7 million workers by 1960. Adoption and effective use of machines, fertilizer, improved varieties hybridization.

1. What problems were faced by farmers in the 1920s?

1914- prices rose as Europe demanded food for war => expanded farm sector. use land not usually in circulation. mechanization. debt. decreased costs. More foreclosures in 1920s: Just 1920-21 depression: 453,000 farmers lost farms... wheat, corn, livestock and cotton worst hit. Golden Age of Agriculture (1895-1915) income/person employed in Agriculture is 2/3 of those employed industry. 1914 prices rose as Europe demand food for war -> expanded farm sector in U.S. -> use land not usually in circulation-> mechanization-> debt-> ^cost. More farm foreclosure in the 1920s. Farm closed. 3.2 per 1,000 1913-1920 10.7 per 1,000 1921-1925 Just in the 1920-21 depression, 453,000 farmers lost farms wheat, corn, livestock & cotton worst hit.

1. How did the financing of the East Coast intercity railroads differ from the financing of the East-West lines?

The East-West coast lines needed a lot of up front costs and the railroads didnt earn profits until the line was completed. The intercity railroads were able to pay for themselves rapidly.

1. What were the three waves of railroad building and how did the standard gauge affect the importance of railroads for growth?

Three waves of RR building 1. 1868 1872 o May 10, 1869 first transcontinental RR line East to West in 7 days on Union Pacific & Central Pacific railroad lines o 2x previous track o Northern & Midwest - Pause 1873-79 recession 2. 1879- 1883 o 8,000 miles/yr

Southern Pacific o Northern Pacific o Santa Fe transcontinental - recession 1883 85 3. 1886 1892 o Filed holes in Southern and gulf coast systems

Transcontinental railroad to Pacific Northwestern *Last big surge before depression on 1893 *1900 = 200,000 miles of track of all that would be built

1. What was the role of land grants in the building of the railroad? Land Grants XOXOXOXOXO OXOXOXOXOX X: govt land grants to RR companies O: knew land will have RR, so make them much more valuable

1. Made directly to companies or to states to give up companies 2. In exchange, US troops transported free and mail transported under rates set by Congress 3. 1850- 1871 131 million acres. Invent for RR use 4. Moral hazards of direct underwriting or profit guarantees 5. Federal government owned the land and would benefit from RR passing through (high value) 6. Total of $400,00 ?? (400 or 400,000) million or 5% of amount invested in RR 1850-1880 came from land grants how good youre at navigating in Washington Who get the land grants very political But it was at least for the privatization of the RR 1. Be able to discuss in detail whether the railroad was built ahead of demand 1. Hard to measure because collective good could be greater than the good for an individual. There are positive externalities (society gains>investor gains) 2. Private investors aversion to risk was greater than societys risk aversion 3. Fishlow, an economic historian argues that most routes were profitable immediately. He believes no the RR was not built ahead of demand 4. Fogel says yes Returns to private investors would not have been high enough without government subsidies in 1870-72 Needed the government help to build these RR, because didnt have the returns fast enough to encourage the private investment needed. 1. How important were the railroads for economic growth in the U.S.? Be able to analyze and discuss the arguments of Fogel, Fishlow, Williamson and Chandler.

1. Robert Fogel (1964) Social Savings of Rail Roads in 1890? What would the world have been like? Costs of freight.. Rail Road contributed 7.3% of 1890s GDP. * Railroad not indispensible for Modern Economic Growth 2. Albert Fishlow (1965) +Railroad did stimulate economic growth and national development with its expansion between 1830-1860. important, NOT the big thing. 3. Jeffrey Williamson (1975) More dynamic analysis 18% of 1892 GDP was result of Railroad 4. Alfred Chandler (1965, 1977) Bread measure, cant use precise measures and get complete picture. However, it is obvious that the Railroad were extremely important. 1. How were the railroads weakened by legislation? What were these pieces of legislation and how did they weaken the railroads? Weakening of the RR: as a result of the farmers reaction to the new forms of competition, RR was the first industry to be regulated. -1871 to 1874 (Granger Laws) Grange State Ag. Organization. State Laws that set max rates and outlawed higher rates for shorter distances. -1877 Munn vs. Illinois upheld Granger Laws. States could regulate industry. -1886 Wabash RR vs Illinois only congress could rule interstate commerce. Any RR that went from State to State voids Granger Laws. 1. What was the Interstate and Defense Highway System? Interstate and Defense Highway System (1959):

Eisenhower, 90% of funds federal, 10% state funds, 50,000 miles new interstate. * led to more growth in 1960s 1. What did the beginning of industry in the U.S. look like? The beginning of Industry 1. In 1860 the US was still primarily agrarian, 4 cities outside of E. Coast states had more than 5,000 residents in manufacturing. industry was widely dispersed, rural, small-scale & simple. 2. In 1860, of the top ten industries in terms of value added, five were just one stage removed from primary products. 3. Before turn of century, sole proprietorships or partnerships ->linked to life & death of owner 4. Primary source of power was water 5. Exceptions: Giant flour mills New England textile mills. 1. What were the technological advances in early American industry? Technological advances -The American System (the backbone of much of the advance) a) Produced by highly specialized machines b) Highly standardized manufactures c) Made up of interchangeable component parts *Electricity becomes a source of power and light so they were no longer limited by plant layout.

1. What was mass distribution and what did it look like at the end of the 19th and beginning of the 20th centuries? Mass Distribution -Railroad logistics meant that a storage facility for each customer was too cumbersome. Birth of commodity exchange (grade and weight each farmers crop, give standardized future contract.) *more efficiency after harvest -Telegraph: allowed real time link between buyer and sellers (sellers can redirect train cars in transit to places with higher demand) -Wholesalers were more centralized. They put their own name on products and hired traveling salesmen to sell their products. -Large retailers: department stores, chain stores. Examples: Macys, Nieman Marcus Internalized high volumes of market transactions within a single large modern enterprise. (Same workers, same facilities handling many, various products)

1. What was mass production and what did it look like at the end of the 19th and beginning of the 20th centuries?

Electric power, new appliances, suburban housing,were now available to the middle class. in 1920 of the family in homes without electricity, 1930 less than without electricity. People could now live outside of cities because the great construction boom made commuting to work possible.

1. What were the new forms of business organization that we saw in the U.S. at the end of the 19th and beginning of the 20th centuries?

New Forms of Organization use by Big Businesses 1. Terminology: a) Pooling: an informal arrangement among firms. Pool revenues and divide in some way (restrict output per the pooling agreement) No policing mechanism therefore incentive for some firms to cheat to get larger market share. This arrangement rarely lasts. b) Cartel: formal agreement uniting firms to act as a monopolist. Not secretive. c) Trusts: An ideal form to get monopoly profits with many firms. All participating firms turn in all stock certificates to get certificates of trust that is divided among them. Formally reduced incentives to cheat. Only make money if whole trusts made money. Trustees have voting control over each firm. *Note: each firm is still separated, producing their own products. Standard Oil was built as a trust (too successful/efficient, squash competition) States interfere and put anti-trusts laws by states. d) New Jersey created holding companies (1889) -Allow one company to hold stocks from other companies (same outcome as a trust). Ex. Standard Oil was a trust in Ohio and reincorporated as a holding Co. in NJ. e) Could have horizontal integration (buying up same stage of production) or vertical integration (buying up the various stages of production) 1. What were the cases and pieces of legislation that limited big business in the U.S. at the end of the 19th and beginning of the 20th centuries? Regulation of Industry

-Sherman Act (1890): wont allow businesses to be anticompetitive; Cannot restrict trade, illegal to restrict trade or commerce. -(1895) US vs. EC Knight & Co. -Allowed EC Knight & Co. to have 98% of sugar refining market share. - Same year, we had Great Merger Wave -1911: Supreme Court declared that Sherman Act could impact big business as long as they acted non-competitively. If you lowered prices to get a competitor out of the market, then you were resolved. Rule of Reason Acting as a monopolist meant government could break you up