The Development of the American Economy.

• Author: Goldin, Claudia
• Position: Program Report

The research interests of Development of the American Economy (DAE) program members are expansive. Temporally, their work has spanned virtually all of recorded history; geographically, it has traversed much of the globe; by economic sub-field, it can be included in each of the other NBER programs. That said, most DAE members explore the economic history of the last two centuries. Much of their work places the United States at the center, although interest in comparative economic history has grown considerably.

What is the field of economic history? Are economic historians "economists who use data from more distant periods"? Economic history is a distinctive discipline that views issues from a long-term perspective. History is a seamless cloth that can be unfolded to the present and that is regularly rewritten as the issues of the present change. In summarizing the research of DAE members, I will emphasize how the work addresses current issues and concerns. The summary includes many, but could not include all, of the Working Papers and books published in the past year or two by the more than 50 Research Associates and Faculty Research Fellows of the DAE.

The research topics of DAE members can be grouped under four broad headings: Political Economy; Labor and Population; Productivity; and Financial History and Macroeconomic Fluctuations. DAE members publish books in the Long-term Factors in Economic Development series, as well as NBER Working Papers and conference volumes.

Political Economy

The area of political economy has been one of the most vibrant in the DAE Program. Corruption in the political sphere is a subject of great current interest. Was government in the United States once considerably corrupt, just as developing and transition economies are today, and did it subsequently become less corrupt as it underwent various reforms? Edward L. Glaeser and I, together with various DAE members and others, assembled a conference in July 2004 to explore these questions. The resulting volume, Corruption and Reform: Lessons from America's Economic History (University of Chicago Press, 2006), makes several contributions in measuring the rise and fall of corruption in the United States, examining the factors that fostered reform (for example, rules rather than discretion in New Deal, strong and independent press), and exploring interrelationships between governmental corruption and private fraud. The weight of the evidence suggests that governments at all levels in the United States were far more corrupt in the past and that a series of reforms and public awareness turned the tide.

In a series of influential papers, Stardey L. Engerman and Kenneth L. Sokoloff have explored the enduring role of initial conditions, such as colonial land-to-labor ratios and economic inequality, on later economic development. Greater inequality, which often accompanied slavery, stifled investments in education and thus lowered economic growth. The locus of government--why states, and not the federal government, were once the main spending units--has concerned John J. Wallis in several of his papers. In previous work, Wallis emphasized the fiscal angle and devised a theory of the lowest cost revenue raiser. But in a recent paper with Barry Weingast, he answers the question from a political standpoint. When government is small, the nation is geographically large, and projects are lumpy, Congress cannot agree on spending; thus the funding of projects takes place at a lower level, for example the states in the early nineteenth century. Other work in political...