Faeelin
Banned
Ransom's CSA emancipation scenario has a big problem. Namely, that his
projected annual cost is off by a factor of 100.
It took me a couple of readings to notice this, and I'm fairly
surprised that the error wasn't caught somewhere in the editing
process, but I've rechecked the math and I believe Ransom made a
serious mistake. Compensated emancpiation, at a manageable coast, is
an important part of his discussion of the CSA's political evolution
after independence. But his numbers just don't work.
Ransom's basic idea is that slaveowners, circa 1880, are compensated
with perpetual 4% bonds for the value of their slaves (which have
depreciated a bit since 1860 due to a cotton glut and consequent price
decline). He estimates the total face value of the bonds as between
$26.6 billion and $31.9 billion. These are hypothetical CSA dollars of
1880, worth 1/10th of a US dollar of 1860. In Ransom's timeline the CSA
does a better job of managing revenue and inflation than was the case
historically.
I can accept Ransom's calculations of the total cost--he estimates the
slave population in 1880 at around 5.5 million, and he postulates
compensation rates between $12,000 and $10,000 for an adult man and
between $9,000 and $7,500 for an adult woman. These are inflated
dollars, remember--on the same basis the 1860 price of an adult male
slave was around $15,000. Owners of children under 15, in Ransom's
scheme, receive no payment, so the average compensation per slave is
between $5,800 and $4,800 (p. 262-63).
But when he states the annual costs of emancipation, Ransom goes badly
wrong (p. 264):
"The emancipation bonds would be issued in perpetuity and given to the
owners at the time of emancipation. They would carry an interest rate
of 4 percent per annum and would be negotiable instruments whose price
would vary with the rate of interest in the economy. The total
interest cost to the Confederate government would be between $10.6
million and $12.7 million each year, or less than eighty cents per head
for the population of the Confederacy--including the freed slaves."
Unfortunately, $10.6 million is not 4% of $26.6 billion. It's 0.04%,
which is not an interest rate I think the slaveowners would accept.
Annual payments of 4% on $26.6 billion, Ransom's low-end estimate,
would be just over $1 billion. Using Ransom's estimated 1880 CSA
population of 15.2 million, that's a minimum of $70 per person.
Convert that to 1860 dollars and the annual per capita cost is $7.00.
And that's a _lot_ by the standards of the time. In fact, it's more
than average per capita US government revenue for the 1870s or the
1880s (in 1860 dollars). I don't think there's any way the CSA's
nonslaveholders would allow themselves to be taxed anywhere near enough
to pay this off.
Getting rid of slavery would be nowhere near as easy for the CSA as
Ransom portrays.
http://groups-beta.google.com/group...6b00f/b0f08afb906226db?hl=en#b0f08afb906226db
Fortunately, Mr. Ransom responded to this criticism.
I appreciate your calling attention to the problem associated
with my calculation of interest costs resulting from the
emancipation scheme outlined in Chapter 4 of my book,
Confederate States of America: What Might Have Been. I
visited the website you referenced in your e-mail. I was not
aware of its existence until you pointed it out.
Apart from the calculation error -- which I will comment on
below -- I did not find any of the criticsms of my scenario
sufficiently compelling to require comment. What I love about
counterfactual or alternative history is that you can never
disprove that something that did not happen could not have
actually happened; you can only claim that something else
might have happened. My critics on the soc.history.what-if
website are free to take issue with my conjectures and come up
with their own versions which may or may not be more plausible
than mine. For the time being, I do not choose to do battle
with them on issues of whether this or that "what might have
been" could have happened. (Because it probably could have.)
As for the error in the emancipation costs, I recieved a very
careful comment from one of the participants on the website
pointing out my error and calculating the correct figures. By
way of commenting on that problem, here is what I replied to
his email:
It appears that you have indeed uncovered a significant
understatement of the costs of the scheme presented in the
book. After checking my notes I agree that your adjusted
figures are correct. The per capita costs of interest for my
emancipation scheme would be in the range of $70 - $84 in 1880
dollars.
This is considerably more than the amount I present in the
chapter, and I concede that it makes my proposed scheme for
the 1880s less realistic. But I do not think it really
undermines the underlying argument that the CSA would
emancipate its slaves. The logic that falling slave prices in
response to falling cotton prices would create pressure for
emancipation still holds, and I remain convinced that it is
likely that at some point in the late 19th century, the CSA
some for of emancipation would have emerged.
There are a couple of reasons why I hold to my position:
First, the amount of debt involved is not that horrendous - If
you adjust for the inflationary rise in prices, it is roughly
the same as the debt incurred for fighting the war. This
would, to be sure, involve a far higher level of government
expenditure on debt retirement - as you note in your email.
But remember that for the Planters, the scheme would also mean
they retain their wealth, which was being eroded away by the
falling value of their slave assets. For simplicity, look at
the situation in 1860 dollars. Gerald Gunderson claims that
the average income of a white Southerner was around $220. It
would probably be higher by the 1880s. That means payments
for debt costs (which are being paid to the planters) would be
$7 to $8.50 per capita - a tax of around 3%. For freed blacks
- who would presumably pay taxes and receive no interest
payments, the relative cost would be much higher. But they
would still receive some degree of individual freedom, and in
any event they would not vote on the terms of the emancipation
scheme.
Second, the exercise in the appendix is simply intended to
show that some scheme was feasible. Unfortunately, my
calculation error obscured this point by making my proposed
costs way too low. But the plan I propose in Chapter 4 and
the appendix is also an "upper bound," so to speak to the
level of benefits the government will pay. It allows for
extremely generous payments to the planters based on slave
prices that are near to the level of 1860 in real terms.
Moreover, the interest rate paid on the bonds is similarly
generous. Both these factors considerably inflate the "costs"
of the project. Finally, because I want to get things "jump
started" so to speak, I timed the emancipation to be in the
mid-1880s - when slave prices were still fairly high. (I
happen to think this would have been the time to act; though
whether it is that feasible political remains open to
criticism, as several people have pointed out.) It is not
difficult to construct a less generous scheme that would bring
costs into line - surely by the late 1890s.
Finally, I would note that my argument that the South would
free its slaves follows the emerging historical wisdom. I
think that most economic historians have come to the
conclusion that slavery would have died out of its own accord
whether or not the South won the war. What I have added to
that argument is the point that it would actually have come
sooner in an independent Confederacy because with the removal
of the anti-slavery groups in the North, there would be less
resistance to making payments to the former slaveholders. No
matter how you figure, at some point slaveholders become
interested in protecting their slave assets.
In summary, I am embarrassed by the mathematical error in the
book; it detracts from the larger argument of the book,
which I think is still robust enough to survive being off by
a factor of 100! I am currently talking to my publisher about
how to deal with the problem.
I'm always pleased to hear from an old Reedie. I apparently
arrived at Reed the fall after you left; my brother David
would have overlapped you by at least a year. Both my wife
and I did indeed stay the course through the thesis and have
valued our Reed experience over years.
_____________
The lesson here, I suppose, is that just because some one includes facts, doesn't mean that they're right.
projected annual cost is off by a factor of 100.
It took me a couple of readings to notice this, and I'm fairly
surprised that the error wasn't caught somewhere in the editing
process, but I've rechecked the math and I believe Ransom made a
serious mistake. Compensated emancpiation, at a manageable coast, is
an important part of his discussion of the CSA's political evolution
after independence. But his numbers just don't work.
Ransom's basic idea is that slaveowners, circa 1880, are compensated
with perpetual 4% bonds for the value of their slaves (which have
depreciated a bit since 1860 due to a cotton glut and consequent price
decline). He estimates the total face value of the bonds as between
$26.6 billion and $31.9 billion. These are hypothetical CSA dollars of
1880, worth 1/10th of a US dollar of 1860. In Ransom's timeline the CSA
does a better job of managing revenue and inflation than was the case
historically.
I can accept Ransom's calculations of the total cost--he estimates the
slave population in 1880 at around 5.5 million, and he postulates
compensation rates between $12,000 and $10,000 for an adult man and
between $9,000 and $7,500 for an adult woman. These are inflated
dollars, remember--on the same basis the 1860 price of an adult male
slave was around $15,000. Owners of children under 15, in Ransom's
scheme, receive no payment, so the average compensation per slave is
between $5,800 and $4,800 (p. 262-63).
But when he states the annual costs of emancipation, Ransom goes badly
wrong (p. 264):
"The emancipation bonds would be issued in perpetuity and given to the
owners at the time of emancipation. They would carry an interest rate
of 4 percent per annum and would be negotiable instruments whose price
would vary with the rate of interest in the economy. The total
interest cost to the Confederate government would be between $10.6
million and $12.7 million each year, or less than eighty cents per head
for the population of the Confederacy--including the freed slaves."
Unfortunately, $10.6 million is not 4% of $26.6 billion. It's 0.04%,
which is not an interest rate I think the slaveowners would accept.
Annual payments of 4% on $26.6 billion, Ransom's low-end estimate,
would be just over $1 billion. Using Ransom's estimated 1880 CSA
population of 15.2 million, that's a minimum of $70 per person.
Convert that to 1860 dollars and the annual per capita cost is $7.00.
And that's a _lot_ by the standards of the time. In fact, it's more
than average per capita US government revenue for the 1870s or the
1880s (in 1860 dollars). I don't think there's any way the CSA's
nonslaveholders would allow themselves to be taxed anywhere near enough
to pay this off.
Getting rid of slavery would be nowhere near as easy for the CSA as
Ransom portrays.
http://groups-beta.google.com/group...6b00f/b0f08afb906226db?hl=en#b0f08afb906226db
Fortunately, Mr. Ransom responded to this criticism.
I appreciate your calling attention to the problem associated
with my calculation of interest costs resulting from the
emancipation scheme outlined in Chapter 4 of my book,
Confederate States of America: What Might Have Been. I
visited the website you referenced in your e-mail. I was not
aware of its existence until you pointed it out.
Apart from the calculation error -- which I will comment on
below -- I did not find any of the criticsms of my scenario
sufficiently compelling to require comment. What I love about
counterfactual or alternative history is that you can never
disprove that something that did not happen could not have
actually happened; you can only claim that something else
might have happened. My critics on the soc.history.what-if
website are free to take issue with my conjectures and come up
with their own versions which may or may not be more plausible
than mine. For the time being, I do not choose to do battle
with them on issues of whether this or that "what might have
been" could have happened. (Because it probably could have.)
As for the error in the emancipation costs, I recieved a very
careful comment from one of the participants on the website
pointing out my error and calculating the correct figures. By
way of commenting on that problem, here is what I replied to
his email:
It appears that you have indeed uncovered a significant
understatement of the costs of the scheme presented in the
book. After checking my notes I agree that your adjusted
figures are correct. The per capita costs of interest for my
emancipation scheme would be in the range of $70 - $84 in 1880
dollars.
This is considerably more than the amount I present in the
chapter, and I concede that it makes my proposed scheme for
the 1880s less realistic. But I do not think it really
undermines the underlying argument that the CSA would
emancipate its slaves. The logic that falling slave prices in
response to falling cotton prices would create pressure for
emancipation still holds, and I remain convinced that it is
likely that at some point in the late 19th century, the CSA
some for of emancipation would have emerged.
There are a couple of reasons why I hold to my position:
First, the amount of debt involved is not that horrendous - If
you adjust for the inflationary rise in prices, it is roughly
the same as the debt incurred for fighting the war. This
would, to be sure, involve a far higher level of government
expenditure on debt retirement - as you note in your email.
But remember that for the Planters, the scheme would also mean
they retain their wealth, which was being eroded away by the
falling value of their slave assets. For simplicity, look at
the situation in 1860 dollars. Gerald Gunderson claims that
the average income of a white Southerner was around $220. It
would probably be higher by the 1880s. That means payments
for debt costs (which are being paid to the planters) would be
$7 to $8.50 per capita - a tax of around 3%. For freed blacks
- who would presumably pay taxes and receive no interest
payments, the relative cost would be much higher. But they
would still receive some degree of individual freedom, and in
any event they would not vote on the terms of the emancipation
scheme.
Second, the exercise in the appendix is simply intended to
show that some scheme was feasible. Unfortunately, my
calculation error obscured this point by making my proposed
costs way too low. But the plan I propose in Chapter 4 and
the appendix is also an "upper bound," so to speak to the
level of benefits the government will pay. It allows for
extremely generous payments to the planters based on slave
prices that are near to the level of 1860 in real terms.
Moreover, the interest rate paid on the bonds is similarly
generous. Both these factors considerably inflate the "costs"
of the project. Finally, because I want to get things "jump
started" so to speak, I timed the emancipation to be in the
mid-1880s - when slave prices were still fairly high. (I
happen to think this would have been the time to act; though
whether it is that feasible political remains open to
criticism, as several people have pointed out.) It is not
difficult to construct a less generous scheme that would bring
costs into line - surely by the late 1890s.
Finally, I would note that my argument that the South would
free its slaves follows the emerging historical wisdom. I
think that most economic historians have come to the
conclusion that slavery would have died out of its own accord
whether or not the South won the war. What I have added to
that argument is the point that it would actually have come
sooner in an independent Confederacy because with the removal
of the anti-slavery groups in the North, there would be less
resistance to making payments to the former slaveholders. No
matter how you figure, at some point slaveholders become
interested in protecting their slave assets.
In summary, I am embarrassed by the mathematical error in the
book; it detracts from the larger argument of the book,
which I think is still robust enough to survive being off by
a factor of 100! I am currently talking to my publisher about
how to deal with the problem.
I'm always pleased to hear from an old Reedie. I apparently
arrived at Reed the fall after you left; my brother David
would have overlapped you by at least a year. Both my wife
and I did indeed stay the course through the thesis and have
valued our Reed experience over years.
_____________
The lesson here, I suppose, is that just because some one includes facts, doesn't mean that they're right.