Comment

Abstract

Lance Davis organized this session and so it is appropriate for me to begin with comments on the paper of John Haeger, which has to do with a most Davis-like topic, the flow of finance from east to west arising out of a financial innovation. There are a couple of Davis touches that are missing, however. Presumably the flow responded to regional interest rate differentials and one would like to know more about them, in a systematic way. The innovators were up to moving funds interregionally, but not up to investing in unconventional lines, behavior attributed by Haeger to their fear of "speculation." But as Davis has shown, the term "speculation" can mean many things. Were the innovators fearful of manufacturing, per se, or just manufacturing in upper New York State and Ohio? What exactly did they mean by "speculative"? Haeger points out that the innovation was an important one. But in what sense? The New York Life had under $7 million loaned in 1837, which compares with a U.S. capital stock of perhaps $4 or $5 billion, by which standard the trust company was minuscule. But compared with other firms of the day and with the financial demands of upper New York State, it must have been enormous. Did it also open the way for a proliferation of such firms? Finally, I wish Haeger had not adopted the conventions of his subjects in the handling of the "capital" of the two firms he has studied. Capital is best viewed as the stake of ownership, a residual account. The relationship of capital to deposits is best treated in terms of leverage. Incidentally, why is there no mention of the resources provided by premiums? Despite these modest complaints, I found Haeger's paper most interesting and helpful. Allan Kulikoff has added yet another to that marvelous set of papers on colonial Maryland, to which Carr, Menard, and Walsh have also contributed. This one is not as clear as some of the others, but I think the main thesis is that economic growth in colonial Maryland was rapid for a time, then sharply slowed down for an extended period, after which it speeded up again. The two periods of rapid growth were based on the adoption by Maryland planters of an export crop: tobacco, in the first period, grains, in the third. The period of slow growth was due to problems in the tobacco market, which Kulikoff attempts to explain. The broad pattern Kulikoff describes and his account of the main forces at work are plausible and very helpful. The data on tobacco exports in Historical Statistics, showing, as they do, no trend from late in the seventeenth century onward, had always intrigued me, especially in view of the fact that this is the period of major slave importations. What was going on here? Were slaves replacing Englishmen in tobacco, the latter moving into subsistence farming or grain production a la Klingaman? I think Kulikoff is telling us that this explanation is correct, while adding a good deal more about the effects of the transitions on economic growth in Maryland and many details of the nature of economic growth. I have only one suggestion of any consequence for Kulikoff. He measures growth with a wealth series, deflated by a consumer price index. Why a consumer price index? Why shouldn't wealth be deflated component by component, using prices relevant to each component? Does Kulikoff really want to know the constant price value of consumer goods that could be purchased with the current price value of wealth held in each year of his series? Or does he want to know the constant price value of wealth held in each of these years? I think the latter is the more appropriate measure. Terry Anderson also deflates a wealth series by a price index that approximates a consumer price index. As a good new economic historian, however, he provides us with the