A Tricky Calculation

by Dave Schuler on May 27, 2014

Tyler Cowen has a very good post on the issue of reparations for slavery. Here’s the meat of it:

The economic incidence of slavery is a tricky matter (most of what Squarely Rooted argues here is wrong). A lot of whites in the slave trade bought slaves at the going market price and earned the going market rate of return. Of course these same whites were reluctant to free the slaves they had bought and that meant terrible lives for the victims. But the gains of those whites are not mirror images of the losses of the slaves. Thus in some regards slavery was a massive collective action problem with a relatively small number of beneficiaries. Those benefiting would include individuals who first saw the gains from seizing slaves from Africa, and individuals who were good at spotting undervalued slaves and buying them up and exploiting them. That’s a fair number of people but it is far from comprising the overwhelming majority of society in 1840, much less 1940 or 2014, once we consider possible wealth transmission to their heirs.

I think that in order for any move on reparations to meet moral muster it must increase the total amount of justice in the world and that’s a very tricky calculation to make. We tax individuals and spend to aid other individuals rather than taxing groups to improve the lot of other groups.

Of course, if you don’t care about the actual history, costs, or benefits it does make the calculations a lot easier.

{ 6 comments… read them below or add one }

Zachriel May 27, 2014 at 8:19 am

It’s not how much whites benefited. If you rob money, it doesn’t matter if you then lose it while escaping. It’s how much damage was caused by your actions. In this case, it’s how much damage was caused by the corporate entities involved in slavery; the United States perhaps, or certainly the southern states who acted contrary to the 14th Amendment after the slaves were freed.

PD Shaw May 27, 2014 at 1:57 pm

The history is more complicated than most Americans appreciate. Whites who can trace their ancestry back to the Chesapeake Bay Colonies in the 17th century, may very well likely have been slaves, having the status of indentured servant without term limit. The London slave trade involved snatching children off its streets to be sold to Virginia plantations. Also, habitual charity cases were referred to authorities by the local parish for forced deportation. Convicts, of course, as well as the Irish.

At the same time, free blacks were migrating from the West Indies to the Chesapeake colonies as free men after completing their term of servitude, or they too could be bound as indentured servants for a term of years, after which they too could acquire property. The notion that slavery was a black status without term and inheritable emerged around 1700. And necessarily required prohibitions against intermarriage that had been common before.

Since my research into my Shaw ancestry appears to dead end with a Shaw farming as a tenant of My Lady’s Manor near Baltimore in the early 17th century, I’ve at least considered the possibility that the Shaws came as slaves. Of course they were not held to this status for generations, but I think the freedom with which one came to this country is not entirely relevant.

PD Shaw May 27, 2014 at 2:12 pm

“in the early 17th century” = in the early 18th century

PD Shaw May 27, 2014 at 3:26 pm

@Zachriel, there are two common ways to measure damages: (A) Compensatory (when A injures B, the measure of B’s losses) or (B) Restitution (when A injures B, the measure of A’s benefit). I think you are arguing for compensatory damages, but you muddy it a bit with the focus on “corporate entities,” involved in slavery. Cowen is arguing that those involved in the business of slavery didn’t make much money. The revolutionary demand is for a largely fictional amount that is resurrected by use of compound interest.

Compensatory damages has the potential benefit of avoiding blame. Society can choose to compensate victims without assigning fault (e.g., 9/11 fund), but that is impossible with restitution.

steve May 27, 2014 at 6:41 pm

Cowen is making a bit of an odd argument I think. He is arguing that they would have made a lot more money if they did not have slavery. Maybe, but he is making assumptions founded better upon modern thinking. White people dropped like flies in the southern climate. It is not clear that they could have developed the South into the agricultural power it becomes w/o slaves. Would they have turned to industry? Big assumption. If you are dropping dead in the southern heat farming, you are going to do a lot better in a factory?

Of course, there is a lot to be said for his basic argument. An economy where just a few people are ultra wealthy, the large, slave owners, and everyone else is not certainly seems like a poor growth model. Or at least it does unless you are talking about the present. Still, I think Zach has it. The issue is the damage done to the slave population. Conjectured harm to the slave owning class is largely irrelevant.


PD Shaw May 27, 2014 at 8:22 pm

@steve, Southern Democrats actively opposed the types of economic policies that would have promoted a mixed economy in the South, such as investing in roads and canals and lending institutions. The Northern states ended up making these investments on a state basis, and had mixed economies.

Cowen’s opinions I believe are shaped by Robert Fogel’s _Time on the Cross_, which concluded that slavery was an economically successful model with returns comparable to manufacturing, was increasingly valued in urban settings and transferable to manufacturing, but that the slaves benefited from this model to the tune of receiving 90% of the income he produced (in food, housing, medical care, bonuses), making their situation comparable to free white laborers at the time. Free white labor was often cheaper and more expendable. Most of the work in New Orleans to drain the swamps was done by the Irish, who were the definition of expendable.

What is missed by a strict economic analysis are non-economic factors like personal freedom. (Fogel had to spend a lot of time explaining that he was making an economic analysis of slavery, not a moral one). Also, unlike free whites, a slave had unique value as both labor and as capitol; its the ability to sell the slave at will that makes it a better financial arrangement than free white labor. But the value of selling oneself as a slave is a restitution concept, not compensatory, unless one is going to argue that slavery is proper, so long as the slave receives his own value.

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