This ain’t as wonky as it looks. I’m asking how a new way of looking at antebellum slavery could be used to assess the social costs imposed by private enterprise in our own time. The subtitle comes from Elizabeth Anderson’s great book of 2017, worth reading on the ironies of “free labor.”
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Alec Nove, the semi-famous historian of Soviet Russia, once remarked that “the incorporation of externalities in the body of theory” marked a promising shift in the normal science of economics, the discipline that produced him. By “externalities” he meant the social costs of both private and public enterprise, particularly the environmental damage willfully done by the managers of such enterprise under capitalism or communism (and, conjecturally, under what he called “feasible socialism”).
And by “incorporation” he meant calculating and then accounting for those costs, in effect translating the perceived qualitative effects of economic transactions into the quantifiable lexicon of mathematical formulae, where they could be priced. This formidable task assumes the plausibility of dividing time into fungible, measurable, commensurable units in the manner of Marx’s labor theory of value, and by the same token it requires the articulation—the quantification—of what Marx himself called “the historical and moral element” in the determination of wages levels.
But taking up that task is not an exercise in abstraction from realities “on the ground”—it ain’t no thought experiment, as per the out-of-control trolley cars of contemporary moral philosophy (which people will I sacrifice to let the greater good prevail?). It has immediate practical implications and consequences because it changes the ways we can think about labor markets in the present as well as the past, about slavery as well as capitalism. Among other collateral benefits of this change, it enables us to reconsider the content of choice and the scope of consent when wage labor defines the predominant social relation of goods production. It also marks the limits of economic history in understanding capitalism, by showing us how knowers are dimensions of the known—that is, why thinking about the market is itself a material force that determines what it contemplates.
My text for today—the demonstration of these propositions—is an extraordinary paper from the National Bureau of Economic Research (NBER), which, notwithstanding its status as a private enterprise, a kind of clearinghouse for economists’ work in progress, has a profoundly public presence, not least in its widely cited and accepted measurement of business cycles. The paper is “One Giant Leap: Emancipation and Aggregate Economic Gains,” by Professors Richard Hornbeck (Chicago) and Trevon Logan (Ohio State). It’s NBER Working Paper 31758, October 2023, free online.
The argument joins, adjourns, and departs from the long-standing debate on the role of the slave South in the economic growth and development of the US. That debate has been variously framed, most consistently as answers to the question of slavery’s profitability and larger viability—could it have conquered the continent and South America, as its promoters promised, if allowed to expand according to the Kansas-Nebraska Act of 1854 and the Dred Scott decision of 1857?—and of its contribution to industrialization— was the Civil War the last bourgeois revolution that released capitalism from the death grip of an anachronistic, quasi-feudal mode of production, or did the seaboard city banks that financed King Cotton use their profits to fund industrial enterprise, or (duh) both?
Hornbeck and Trevon acknowledge but change the terms of debate by focusing on the costs of slavery to the enslaved themselves, and by treating these “marginal social costs” or “non-pecuniary costs” as evidence of market imperfections or inefficiencies that were abolished by emancipation—thus making for substantial aggregate gains in the nation’s economic performance. They write economic history “from the bottom up,” to borrow the slogan that animated the new social history of the late-20th century, when unskilled workers, domestic servants, prostitutes, sailors, and slaves became the proper subjects, in every sense, of scholarly monographs.
In doing so, the authors raise many more questions than they have the time or the methods to address. The naivete of their argument as revealed by this interrogative surplus is astonishing, but that innocence is perhaps its greatest strength as well. For in forcing us to ask these questions on their behalf, in order to make sense of their good- faith argument, Hornbeck and Trevon open up an approach to the history of slavery and the future of capitalism that illuminates both in light of the other. To the same extent, they show us how we might reinvigorate moral philosophy by paying attention to actually existing social conditions—the labor process, say, and the correlative meanings of work—rather than death cabs dressed up as trolley cars.
My procedure is simple. I sample the text and offer commentary, mostly in the form of questions that demonstrate the need to consult disciplines outside of economic theory or history. Keep in mind that the authors assume throughout that the success of slavery in North America represents a “market failure.” In this sense, they remind us that, like it or not, the central question is always, what are markets for?
Their article develops in three parts. Part I (pp. 5-8) lays out the argument’s assumptions and conclusions, then translates these into integers and equations; Part II (pp. 8-16) explains the translation by assigning an economic (quantitative) value to the “social death” suffered by the enslaved; Part III (pp. 16-26) spells out the implications, including the research agenda, that follow from the argument.
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Here’s a summary statement from the Introduction (pp. 1-5):
“Characterizations of slavery as efficient and productive reflect the benefits and costs for slave owners, with market transactions oriented around extracting value from enslaved people. In this paper, we challenge this view. We re-characterize slavery as economically inefficient because there was a massive externality whose implications have been under- explored: enslavers considered their own private marginal benefits and private marginal costs of slave labor when making production decisions in the antebellum era, but they did not internalize the costs slavery imposed on enslaved people. When including costs incurred by enslaved people themselves, the tremendous inefficiency of slavery becomes readily apparent because the value extracted by enslavers was substantially less than the costs imposed on enslaved people. Focusing on the cost of enslavement to the enslaved shows that slavery was a market failure in addition to a moral failure.” (p. 1)
In other words: As distorted by the property in human beings allowed by the legality of slavery, the market erased or externalized the social costs to the enslaved, or failed to internalize such costs. The inefficiencies thus imposed were lifted by emancipation, and must, then, have made for substantial economic gains. Is that an accurate translation? If so, why are the laws that define property and its proper means of conveyance and valuation here treated, albeit covertly, as an exogenous source of market distortions? Aren’t markets inconceivable absent a legal system, or at least a set of rules which bind all parties to the bargains that constitute markets? Is not the common law, which clearly made room for slavery—until it didn’t—such a system, evolving as it did from a rudimentary, customary set of rules whose original purpose was to designate and protect private property?
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For the authors, the difference between slave labor and wage (“voluntary”) labor seems to be that where a free market in labor exists, the costs of working—of alienating one’s labor time—are, or must in theory be, less than the compensation received. The difference between slavery and capitalism is here identified as residing in the social relation of goods production, not the presence or prevalence of greed, profits, commodities, money, accounting, and other such features of markets, ancient and modern. This is already an improvement on contemporary scholarship, which happily conflates slavery and capitalism because it abstracts from that social relation, thus making capitalism a trans-historical mode of production that can and will outlast any political attempt to transcend it. But the difficulties only begin with the bare statement:
“The model captures the core inefficiency of slavery: that landowners consider their private costs of employing enslaved people and free people [sic], and the private cost of employing enslaved people is [sic] less than the cost imposed on enslaved people. This is the fundamental difference from voluntary labor markets, in which people choose to work only when their compensation is at minimum their cost of working.” (p. 5)
I use [sic] here because the first sentence is incoherent or ungrammatical, or both. I believe the authors mean to say that slaveholders treated the costs of employing slave labor as private rather than social, as “absorbed” willy-nilly by the enslaved, in the same way husbands assume that wives and mothers “absorb” the costs imposed on them in their performance of unpaid household labor.
Right or wrong in my belief, the statement raises crucial questions about the costs and compensation of wage labor. Who is to say that these costs are not social? For example, we know by now that Walmart employees typically rely on food stamps and emergency room medical care to supplement their incomes—that is, to feed themselves and to stay healthy enough to work because their compensation in wages doesn’t cover these basic costs of merely living. These supposedly private costs are already social, and yet Walmart is able to externalize them. Why?
We also know that the daily commute, especially as enabled by internal combustion engines and the neglect of public transportation, imposes huge social costs on the public by wasting employees’ time and degrading natural resources. Who pays such costs? Has the fossil fuel industry, or employers in general, been penalized for externalizing them, as the slaveholders were finally penalized by emancipation? Have employees ever been compensated for absorbing these costs?
And what can the words “choose” and “voluntary” mean in this context? Is the sale of my labor time to an employer voluntary if I must buy the right not to die—that is, if my access to a share of society’s good requires an income that I can get only by selling my labor time? What if I choose to forego an income and remove myself from the labor process in solidarity with my fellow workers on strike—because the costs of our employment exceed the compensation our employer is willing to extend—but an injunction forces me back to work because the law of torts says that withholding my labor time damages my employer’s property? What sense do the jolly platitudes peddled by Milton Friedman make in these circumstances? Is the labor market today a free market? Was it ever?
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The authors assume that absent distortions such as property in human beings, markets register all relevant costs. At least that is what I think they mean in making the following statement:
“Enslaved people valued their time more than enslavers, so their inability to purchase their freedom represents a market failure.” (p. 8)
Every man has his price? Probably not, but freedom does. It is clear, in any event, that a market in good working order will price freedom. In that case, I am free to the precise extent that I can buy time for myself or of others. It follows, necessarily, that in a market society, the more money I have the more power I have, because with more money comes more access to and control of time, and power is nothing but control of other peoples’ time. If, as a result of my greater wealth or income, I have more freedom than a person with less money, that person is surely not my equal; for he is less able to constrain and/or mobilize volitions by the purchase of other peoples’ time (time spent in, say, canvassing voters or writing op-eds or wielding weapons as well as producing tangible goods).
Does it also follow that in a perfected market, every unit of time must be for sale, so that I could conceivably offer to buy, or at least rent, every minute of yours? And that I could, in doing so, lawfully enslave you if there were no historical and moral limits to the time I may purchase from you?
Can capitalism develop, exist, or survive without such limits? If markets were perfected in the manner the authors assume possible, would we have completed the development of capitalism or reverted to the moral and economic standards of slave society, wherein the rights of property always already superseded the rights of persons?
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The authors flesh out their argument in Part III, especially at pp. 16-19, where “the core externality creating a disconnect between the private and social costs of enslaved labor” is defined from the standpoint of the enslaved themselves, as the “marginal social costs” and “non-pecuniary costs” they incurred as human beings treated as things, as capital goods.
But how to quantify qualitative experiences? What is a cost that cannot be priced? The authors have no answers because there is none outside of the actuarial tables that the courts use in calculating and imposing punitive damages on defendants convicted of homicide, intentional or not. So they resort to VSL, the “value of [a] statistical life,” to put a price on the life of a person at mid-19th century, then estimate the costs of the “social death”—the permanent loss of any public standing or rights to privacy—experienced by an enslaved person, do the math, and claim that the cancellation of those costs by emancipation produced economic gains worth 7 to 60 years of technological progress.
It’s a convincing use of quantitative methods, and again, it gives us new ways of writing the history of slavery in the US. But the authors also give us every reason to apply their logic and methods to our own time.
The insurance industries, particularly those involved in health care, already know how to estimate the costs of building, deterioration, devastation, and rebuilding, of disease, detecting, diagnosing, and recovering. They know as well how to differentiate between cyclical, natural, and social causes of life-threatening events, and to calculate the resulting costs. And they invented those actuarial tables. Why not put this knowledge to work in estimating the social costs of contemporary working lives as these costs have been externalized by private enterprise—just as Hornbeck and Trevon have done for those enslaved in the antebellum South?
The markets of our time are far from perfect. We can begin to calculate the externalized social costs of the imperfections by counting “deaths of despair,” a rising tide that predates the pandemic by a decade, or, better yet, by noticing the symptoms of an approaching “climate emergency.” But it doesn’t matter where we start to measure such costs—the point is to incorporate the externalities in the body of theory, and from there to change our thinking about markets, always asking, what are they for?