Government and Fiscal Policy in American Economic History

Over the last 225 years, government finances in the United States have gone through three distinct stages. In the first stage, 1790–1850, state governments actively pursued policies to promote economic development and financed them from revenues from state investments. In the second, 1850–1930, local governments became the most important level of government, as measured by revenues and expenditures, and revenues shifted toward the property tax. In the third period, 1930 to the present, the national government became the most active and largest level of government, financed through income and payroll taxes, and developed an extensive network of grants to state and local governments. The chapter tracks the changes in sources of revenues and purpose of expenditures, with specific attention paid to military spending over the entire period.

Antitrust and Regulation in American Economic History

Over the course of American history and economic development, market activity and the systems underlying and governing this activity have coevolved to address the changing fundamentals of human interactions within the marketplace and beyond. The growth of the American economy and its regulation are deeply intertwined. This chapter discusses these coevolutionary forces in the context of the development of American antitrust laws and the expanding reach of government regulation throughout American economic history. Antitrust and regulation are addressed together because they complement each other in their ability to address ex-ante incentives, primarily through regulation, and ex-post corrections and adjustments, primarily through antitrust suits and related legislative action, that may in turn result in new regulation. The chapter focuses on government regulation of industry in two arenas: price and entry regulation with market power (antitrust issues), and regulation of other market failures, especially environmental, health, occupational safety, and product quality regulation.

Property Rights in American Economic History

This chapter examines the development of private property rights to natural resources in the United States as a bottom-up or top-down process. Long-term equity and efficiency effects are highlighted. The role of property rights in avoiding the tragedy of the commons is illustrated. The property rights examined are those to farmland, timberland, as well as grazing rights and mineral rights. Each emerged or were constrained in different ways with important long-term economic and social effects in American economic development. The role of the rectangular survey in deliminating rights to surface land to reduce tenure uncertainty and to promote land and capital markets is described in detail.

Innovation and Patents in American Economic History

This chapter summarizes historical evidence on the link between patent laws and innovation. Earlier historical analyses have emphasized the importance of patent laws in encouraging innovation. Data on exhibits at international technology fairs, such as the 1851 Crystal Palace world’s fair, however, indicate that only a small share of innovations are patented and that non-patent mechanisms may play an important role in encouraging innovation. They also show that inventors’ dependency on patents varies strongly across industries, so that radical changes in patent laws may influence the direction, if not the level, of technical change. Exhibition data also indicate that patents may play an important role in facilitating the diffusion of innovative activity by encouraging inventors to advertise their ideas. These results highlight the need for additional analyses of innovation that systematically analyze patents and alternative measures of innovation.

The Civil War in American Economic History

This chapter examines the following questions: How did the institution of slavery pose an insurmountable obstacle to sectional compromise? What were the “economic costs” of the war to the North and the South? How did the emancipation of four million slaves impact the American economy? What was the economic legacy of the war? The chapter argues that the war was indeed what Charles and Mary Beard termed a “Second American Revolution.” The presence of the “slave power” defeated all efforts at compromise. The wartime expenditures and loss of 750,000 men placed an economic burden that lasted into the twentieth century. Emancipation and passage of the Thirteenth Amendment in 1865 were the enduring accomplishments of the war.

The Record of Economic Growth, Business Cycles, and Economic Policies in American Economic History

This chapter documents and analyzes the American historical economic record of growth and business cycles within the context of long-run and short-run economic policy changes. The United States is unique among all of the developed countries in terms of having a sustained and fairly stable record of economic growth. Given the large changes in various policies that have occurred over time, this record suggests that policy shifts have had almost no impact on the growth rate over the very long run. However, policy changes have had a significant impact on economic activity over shorter horizons, including the Great Depression and World War II. This chapter also argues that microeconomic policies, such as regulatory policies, tax policies, and labor policies, have had as much of an impact on aggregate economic activity as macroeconomic policies, such as monetary policy and government spending and transfer policies

Trade Policy in American Economic History

This chapter reviews the evolution of US foreign trade and trade policy from the colonial period to the present. International trade has been a small but important part of the US economy throughout the country’s history. The Constitution gives Congress the authority to levy import duties. The use of this power has been extremely controversial ever since, with the political debate revolving over whether tariffs on imports should be high or low. This debate has pitted export-oriented producers against domestic producers facing foreign competition. After the Smoot Hawley tariff of 1930, which coincided with the Great Depression, protectionism was given a bad name and the United States began to turn to reciprocal trade agreements with other countries. The led to the formation of the General Agreement on Tariffs and Trade (GATT) in 1947 and later agreements such as the North American Free Trade Agreement (NAFTA) in 1993.

Banking and Monetary Policy in American Economic History from the Formation of the Federal Reserve

The United States Congress created the Federal Reserve System in 1913. The System consists of the Federal Reserve Board in Washington, DC; twelve Federal Reserve Banks; and thousands of member commercial banks. This entry describes the evolution of the system and of monetary policy from its foundation through 2013.

The Environment in American Economic History

Environmental externalities, although important, have received relatively little attention from economic historians. Air, water, and soil pollution and conservation issues date from the time humans arrived in North America. In some times and places, these externalities were severe. The chapter reviews the literatures on historical pollution and conservation, which were largely written by environmental historians. Because of research interests and available data, American economic historians have traditionally been focused on growth in industrial and agricultural output. Recent research by economic historians on the historical effects of pollution on mortality and on the adaptation of agriculture to climate suggests that environmental issues are now of greater interest.

Energy in American Economic History

This chapter examines the electrification experience in the United States from 1880 to 1960, noting electricity’s effects on manufacturing and agricultural productivity, changes in the demand for worker skills, and changes in household structure. The chapter also discusses how the rise of a new industry led to new regulations and addressed discrepancies in service between urban and rural areas and presents evidence on the current state of research into the effects of these institutional changes on electricity pricing and economic growth. This historical literature can inform the current debate on the impact of large infrastructure projects in developing countries, and of electrification in particular. With over half of the world’s population still yet to acquire consistent access to electricity, these issues remain pertinent to the current policy sphere.