For at least the past half century, most economists have viewed the history of slavery in the United States as morally abhorrent but economically advantageous. The argument has run that allocating work to forced laborers was productive, yielding tremendous wealth even if the wrong people received that wealth. Emancipation, correspondingly, has been seen as economically damaging. For example, several studies estimate that southern agricultural output fell by one-third from 1860 to 1880, a period of time during which slavery ended in the US.

But this perspective overlooks the costs imposed upon the people who were enslaved, and the implications for aggregate economic performance when centering those costs in the analysis. Chicago Booth’s Richard Hornbeck and the Ohio State University’s Trevon D. Logan performed a reaccounting and conclude that slavery was highly inefficient.

The researchers contend that emancipation generated aggregate economic gains for the US economy that were worth between 4 and 35 percent of US GDP, making it, even at the low end of their estimation, one of the most important economic events in US history—bigger than the introduction of railroads, by some estimates, and worth 7 to 60 years of technological innovation in the latter half of the 19th century. That boost came from reducing the substantial costs imposed by slavery, even though the result was significantly lower output in former slave states. Calculations of other economic events include costs, they point out: for example, technological innovation generates aggregate gains not only by increasing output, but by increasing output beyond any accompanying increases in input costs.

To get a more complete picture of the economics of slavery, the researchers first considered the amount paid to emancipated people to continue to do gang labor—a system used under slavery for agricultural production, particularly in cotton—for one year. This figure, which they estimated to be $100, was still generally insufficient for emancipated people to voluntarily work under the physically intense gang labor system. But this amount was substantially more than the average annual value that slaves produced for their slaveowners ($60, by their calculations), thus the researchers conclude that slavery cost the aggregate economy at least $40 per year for each enslaved person. Multiplying $40 by 4 million, the number of people held captive in the US, produced an aggregate gain from emancipation equivalent to about 4 percent of total GDP in 1860.

Hornbeck and Logan then drew on research by Harvard’s Orlando Patterson that characterizes slavery as a form of “social death,” in which an enslaved person, robbed of agency and humanity, has no life outside of enslavement. To estimate the cost of this, the researchers used a methodological tool known as the value of statistical life, which measures the economic value of life, typically done using a multiple that’s between 100 and 200 times annual income. Because VSL estimates people’s willingness to risk their lives, economists regularly use it to analyze the trade-offs that people weigh when making decisions such as whether to take a risky job, drive fast, or have a medical procedure.

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A free person doing regular wage labor in the agricultural sector at this time earned about $40 a year, the researchers estimated. Multiplying that figure by 150, they calculated an implied VSL for each enslaved person of $6,000, and an implied annualized cost to each one of $420 ($6,000 VSL multiplied by the going interest rate of 7 percent). After deducting the $60 annual value generated by their enslavement, this left an annual cost of $360 to the aggregate economy, which, multiplied by 4 million enslaved people, equated to some 35 percent of GDP in 1860.

These figures gave the researchers a sense of the scale of the economic benefits of emancipation. By their calculations, the gains produced by emancipation were substantially greater than the costs of the Civil War, on an annualized basis, and were a more substantial driver of US economic growth than railroads, which the late Robert W. Fogel, a 1993 Nobel laureate, estimated added about 3 percent to US GDP. (In a related analysis, Hornbeck and NYU’s Martin Rotemberg have produced revised, higher figures relating to railroads, arguing that Fogel’s analysis of the railroad industry did not allow for inefficiently allocated production inputs, as in the case of slavery. For more, read “Where does new technology have the biggest impact?”)

The now-conventional economic view of slavery was formed by Fogel and University of Rochester’s Stanley L. Engerman. Their 1974 book Time on the Cross: The Economics of American Negro Slavery argued that large slave plantations were economically efficient, and their approach was influential and controversial both within and outside of academia. Among their findings was that enslaved people received 90 percent of what they produced, which Fogel and Engerman compared favorably with the share that modern workers keep after paying income taxes; but Hornbeck and Logan emphasize the importance of considering how little enslaved people received as a share of the costs they endured—only 7 percent.

The work of Fogel and Engerman attracted much debate and revision, yet economists and historians have continued to adhere to its basic premise, focusing on the output produced during slavery and its allocation rather than the aggregate economic implications of the costs borne by enslaved people. For example, the Gilder Lehrman Institute of American History, a US nonprofit dedicated to history education, states that, “Slavery was an economically efficient system of production, adaptable to tasks ranging from agriculture to mining, construction, and factory work.”

Hornbeck and Logan place less emphasis on the “business of slavery” and more on the “economics of slavery” by confronting the full costs imposed on enslaved people. This raises an unlikely comparison to climate change and carbon emissions, in which companies do not have to consider the full costs to society from their pollution. Hornbeck and Logan estimate that emancipation generated aggregate gains over 7 times those that could be realized by eliminating all US carbon emissions today, as a share of GDP. “Focusing on the cost of enslavement to the enslaved shows that slavery was a market failure in addition to a moral failure,” the researchers write.

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