Development of the American Economy.

• Author: Goldin, Claudia
• Position: Program Report

The Development of the American Economy (DAE) Program's 66 members--and the 14 affiliated researchers with primary appointments in other NBER Programs--undertake research that spans much of recorded history, every major sub-field of empirical economics, and most of the globe (but with a concentration on the Americas). The DAE program was created in 1978, as one of six new research programs that were inaugurated shortly after Martin Feldstein assumed the NBER Presidency. The mission of the DAE Program goes back to the original tasks of the NBER--to chart the development of the American economy and to set down its statistical foundations.

I am often asked what constitutes economic history and what the appropriate time frame is. Economic history, like the research of DAE members, knows no time period. It is a "state of mind." History does not simply occur. History is constantly written and rewritten in light of an ever-changing present.

The recent work of DAE members incorporates virtually all NBER Programs and Working Groups: political economy, labor and population, corporate finance and banking, technological change, trade, the macro economy, economic growth, and urban studies. Because of the enormous breadth of research done by DAE members, this report will highlight only two areas of recent activity: historical corporate finance and the long-run consequences of environmental degradation and climate change. In each case, history has been written and rewritten in view of present day events--financial crises and environmental change.

Early Corporate Governance, Enterprise Law, and Financial Crises

Several DAE researchers have been studying the history of American corporations to understand the evolution of their ownership and governance. Until recently, it was generally presumed that the governance failures commonly associated with modern enterprises arose with the emergence of large enterprises at the end of the nineteenth century and were not present among early corporations. The findings of DAE scholars have overturned the conventional view regarding when ownership became separate from control. It occurred much earlier than described by Adolf A. Berle, Jr. and Gardiner C. Means in their well-known 1932 volume, The Modern Corporation and Private Property.

Eric Hilt and Naomi Lamoreaux, in two separate projects, demonstrate that the earliest American corporations were often plagued by the same governance problems that afflicted larger enterprises much later. In particular, early nineteenth century corporations had large numbers of shareholders with little interest in expending effort to monitor the management of firms in which they had a stake. Moreover, controlling shareholders often utilized the firm's resources for their own benefit, a practice known today as "tunneling." (1) Probably the best known historical example of tunneling is Credit Mobilier, the tightly held construction company set up in the 1860s by the Union Pacific. But many examples of tunneling can be found in early nineteenth century corporate histories. Corporate governance failure, according to DAE research, is not a uniquely modern problem.

In response to problems created...