Econ 2200 -...

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I. Why Study Economic History? “Without theory history becomes undisciplined and disorganized, shaping its material by whim, or purely by rhetoric. Without history, theory loses any grounding in the actual course of human events.” William Parker, 1986 - Economic useful to historian b/c o o Helps us organize and derive meaning o 2 nd sentence: economist benefit from history by: If theory doesn’t stand testing then not useful; It’s from history that we get data for testing “History is a vast body of information essential to making public policy decisions. Indeed, history is the testing grounds for economic theory and principles taught in economics classes….” (p. 8, Walton & Rockoff, 2009) - Must have data! II. The Development of Economic History as a Field of Study A. A relatively new field of economics Economic history hasn’t been around (~50 years) as Macro * Micro B. 1958 : “birth of economic history (as separate field) o A. published “Economic of Slavery in Antebellum South” Estimates profitability of slavery Decade leading up to Civil War Ways & methods (calculate rate of return using yield, costs & risk) set paper apart from others Compares slavery’s ROR to ROR on alternative investments o Conrad/Meyer’s paper was written in response to: U. Phillips (1929) – historian, not economist Q: Was owning slaves profitable in 1840s & 1850s? Ps = price of slave, but Pc = price of cotton= stable His conclusion: owning slave was less profitable Note: By this time 1840s & 50s – vast majority concentrated on large cotton production plantation o Conrad/Meyer were bothered by that conclusion, b/c people still used slaves to gain profit when it was concluded unprofitable (irrational behavior) Irrational behavior should get questioned, so they take 2 nd look Use same data from 1840s & 50s to estimate an asset-pricing model for slaves Theory of how price of an asset is determined Price willing to pay for asset today is function of what we expect to gain from future stream of net benefits the buyer expects, discounted to present value MPs = additional product of owning a slave; marginal product of a slave o M = total maintenance costs, food, clothing, shelter R = discount rate t = 30 yrs productive life span If Ps was increasing, then maybe (theoretically?):
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1. Decrease in discount rate? no 2. Increase in MPs due to specialization & division of labor that was possible as cotton farming (& slaves) became concentrated on large plantations higher productivity a. Pc, M = stable b/c of specialization & division of labor (lots of slave & large land) i. So people think slavery was more profitable so willing to pay more!!! ii.
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This note was uploaded on 09/21/2011 for the course ECON 2200 taught by Professor Moore during the Spring '07 term at University of Georgia Athens.

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Econ 2200 -...

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