I have benefited from presenting versions of this paper at a summer conference on “The Application of General Equilibrium Models to Topics in Economic History” sponsored by the Mathematical Social Science Board of the NSF, the University of Wisconsin Economic History Workshop, and the Queen's University faculty seminar. I would like to thank the following members of these seminar groups and other helpful persons: Stanley Engerman, Ronald Fielding, Isaac Fox, Alan Green, Frank Lewis, Donald McCloskey, Thomas Skidmore and R. Craig West for their comments on this manuscript. Without demeaning the contributions of the others, I would like to single out Frank Lewis and Stanley Engerman for their many insights. The Graduate School of the University of Wisconsin supported this research financially, and NSF Grants GS-27282 and GS-3262 enabled the collection of slave price data used in this paper.

¹ See Zilversmit, Arthur, The First Emancipation: The Abolition of Slavery in the North (Chicago: The University of Chicago Press, 1967)Google Scholar for an excellent discussion of the anti-slavery movement in the Norm and the slave legislation, proposed and enacted, which it furthered.

² See Moore, George H., Notes on the History of Slavery in Massachusetts (New York: Negro Universities Press, 1968; originally published, D. Appleton and Co., 1866)Google Scholar for an excellent summary of the events culminating in the emancipation of Massachusetts' slaves.

³ The Supreme Court in Miller v. Dwilling (1826) declared that, “no child can be held to servitude till the age of twenty-eight … but one whose mother was … a slave at the time of its birth … [implies that] the legislature of Pennsylvania though it abolished slavery for life, established … a servitude … which may continue … to the end of the world.” The Supreme Court, therefore, decided that “the child of one bound to serve to the age of twenty-eight, was not bound … for the same period; but was absolutely free.” See Catterall, Helen T., editor, Judicial Cases Concerning American Slavery and the Negro (Washington, D.C.: Carnegie Institution of Washington, 1936)Google Scholar, IV, Cases from the Courts of New England, the Middle States, and the District of Columbia, p. 282.

⁴ If the price at birth were less than zero, the owner should choose to abandon the child, as the maintenance costs during the early period of development are greater than the stream of benefits from the later working stage. A positive price would insure a low rate of abandonment, but would also involve a later age for freedom. Therefore, a zero price would accomplish both a minimal number of orphans and an early age at which freedom would be guaranteed. This interpretation of the New York and New Jersey laws was suggested to me by Stanley Engerman.

⁵ The calculations were performed using Maryland slave price data for the same period. The prices at age 25 and 28 were discounted back to year 0 (birth) and these were subtracted from the prices at birth. The resulting figure is the price at birth of a slave whose services are guaranteed for 25 years (for a female) or 28 years (for a male). A ten percent discount rate is used because this appears to have been the internal rate of return on slave owning.

⁶ See Fogel, Robert W. and Engerman, Stanley L., “The Market Evaluation of Human Capital: The Case of Slavery,” unpublished paper presented to the Annual Cliometrics Conference, Madison,Wisconsin, April, 1972Google Scholar for a discussion of the differences in slave male and female age-net hire rate profiles. They find that female children begin to earn a positive yearly net hire at age 7½, whereas male children produce positive net earnings at age 8½. Females continue to be more productive than males until they are nineteen years of age. After that point, male slaves produce substantially more net income than do females.

⁷ If. the schemes were compensated, this would refer to the costs to the taxpayers.

⁸ The division of female price between the value of the child-bearing capacity and the value of field productive capacity has been computed by R. Fogel and S. Enger man and is contained in Fogel and Engerman, “The Market Evaluation of Human Capital,” Charts V and VI.

⁹ The Federal Census reveals that in 1790 there were 21,324 slaves in New York State, and 20,343 in 1800. This indicates a drop of about 5,000 slaves, if a 20 percent rate of net increase is allowed for during the ten year period. This decline in the slave population was partially due to slaveowner anticipation of the 1799 act. The decline in the slave population during the period 1800 to 1820 is even more dramatic. The gradual abolition bill was not actually effective in freeing slaves during this period, although it may have engendered the manumission of certain slaves due to mounting social pressure. The 1800 slave population in New York was 20,343, but the 1820 figure is 10,088. Using again a 20 percent net rate of increase yields 19,205 slaves who were either manumitted, abandoned children, or smuggled South to slave states. One student of New York slave history believes that independent evidence substantiates the latter hypothesis. He cites as evidence that the gains to be made in smuggling an able-bodied slave South were £40 “after commissions, insurance costs and shipping charges were paid.” McManus, Edgar J., A. History, of Negro Slavery in New York (New York: Syracuse University Press, 1966), p. 170Google Scholar. Certainly after 1817, when the immediate abolition of slaves was guaranteed in ten years, the gains to be made by circumventing the anti-slave-trade laws were great.

¹⁰ This would, of course, increase the costs to slave owners of gradual emancipation. The increased cost would be the discounted value of all remaining productive services from male and female (not including breeding rights as these have been subtracted out before) slaves.

¹¹ The detail of these provisions, as well as the personnel which the British sent to secure them legally for the slaves, indicate that Parliament knew that gradual abolition could involve the working of slaves more intensively. This law was obviously designed to accomplish the abolitionists' goals without the hardship which the Northern gradual abolition laws may have entailed.

¹² This sum was probably not sufficient fully to compensate the owners, and represented about one-twentieth of British total national product in the 1830's.

¹³ It is difficult to state whether or not there was full compensation, since payment was based on a schedule of prices set by law. See Lombardi, John V., The Decline and Abolition of Negro Slavery in Venezuela: 1820–1854 (Westport, Connecticut: Greenwood Publishing Company, 1971)Google Scholar, Appendix 1, “Tables Pertaining to Slaves and Manumisos,” for information concerning the number of slaves emancipated from 1830 to 1854 and the compensation awards to slave owners through the 1854 Abolition Law. Emancipation in Venezuela is interesting because the slave population was very small and the slave owning class was rather minor compared to the free population, but compensation was awarded to slaveowners.

¹⁴ See, for example, Hacker, Louis M., The Triumph of American Capitalism (New York: Columbia University Press, 1947)Google Scholar, for a complete discussion of this notion. This paper, though, does not attempt to assess the North's gains from victory in terms of redistributing income from the South to the North. Therefore, this work alone cannot lead to a rejection or acceptance of the “Beard-Hacker” thesis.

¹⁵ Some might challenge this statement with the fact that most of the emancipation schemes discussed and enacted during the Thirty-seventh Congress provided for less than full compensation. For example, the District of Columbia bill appropriated $1 million for compensation to masters or an average of about $300 per slave. The Border State bill also allotted $300 for each slave freed. Although this was slightly less than one-half the price of slaves during 1860 for these areas, it must be remembered that these acts were wartime measures. District of Columbia slaveowners readily sold their slaves at these “low” prices, probably because they feared expropriation if the South won. In addition, many of the bills passed and debated provided for gradual abolition of slaves. Therefore, although the monetary compensation was less than the total value of the slave, the owner had a longer period of service than if emancipation was immediate.

¹⁶ Since slavery was a state issue, the states would have to purchase the rights to the slaves with the Federal bonds.

¹⁷ Since the slave region can be identified with a specific economic and regional group, there may be reasons for a political settlement to result in a compensation transfer greater than the sum of slave prices. This will be considered at a later point. In addition, all slaves are freed at once; therefore one does not have to consider the effects on price of an increasingly smaller stock of slaves. The Federal Government does not have to pay slave owners the area under the demand curve for slaves, but merely their price as slaves in 1860. This becomes clearer if one considers slaves as free men to be equivalent to slaves as slaves. As slaves are freed they become free laborers; therefore the supply function for slaves moves to the left but that for free laborers moves equally in the opposite direction. Thus, the price of workers does not change as slaves are freed.

¹⁸ This capital value is about one billion 1860 dollars less than that computed by Louis A. Rose. See Rose, Louis A., “Capital Losses of Southern Slaveholders Due to Emancipation,” Western Economic Journal, III (Fall 1964), 39–51Google Scholar. The prices for slaves used in the Rose estimate were partially based on those collected by U.B. Phillips. The lower price series which I have used resulted from a sample collected by R. Fogel and S. Engerman from the identical collection of New Orleans bills of sale which Phillips used. The Fogel and Engerman prices are about 20 percent lower for a “prime field hand” (a slave between the ages of 18 and 30) than those given by Phillips. Phillips' sample is biased upward for an unknown reason. Fogel and Engerman's detailed comments on this problem can be found in a forthcoming article.

¹⁹ For example, the House version of Lincoln's border state bill provided that “‘whenever the President of the United States shall be satisfied that any one of the states of Delaware, Maryland, Virginia, Kentucky, Tennessee or Missouri shall have emancipated [their] slaves …’ he should cause to be delivered to such state 5 percent, 30 year bonds in an amount equal to $300 for each slave freed.” Curry, Leonard P., Blueprint for Modern America (Nashville: Vanderbilt University Press, 1968), pp. 47–48Google Scholar. In addition, the House's Select Committee on Gradual Emancipation reported a bill in January 1863 which also authorized the President to issue 30 year, 5 percent bonds to Missouri when that state adopted immediate abolition. Ibid., p. 53. Other bills provided for 6 percent, thirty year bonds. I have chosen the 6 percent figure to bias my costs upward slightly.

²⁰ One may wonder why the interest rate on the bonds is six percent although the internal rate of return on slaves was somewhat higher. The bonds are far less risky assets than the slaves, and if persons are risk averse a smaller rate of interest would be necessary to induce them to hold bonds instead of slaves in their portfolios.

²¹ These calculations were computed as follows. At six percent, $2.7 billion could be refunded at a constant rate by the taxation of $195,480,000 per year for thirty years. In 1860 there were 26,923,000 whites in the United States; therefore, the per capita tax in 1860 would have been $7.25. Per capita income in 1860 was $141; therefore the tax represented about 5 percent of per capita income. The southern population (that is, the Confederate population) was about 20 percent of the entire nation; therefore the per capita tax would be $9.66 if a refund was to be given the southerners to compensate them not only for their slaves but also for their tax burden. Taxation in this example is assumed to have an equal effect on all. If revenue were raised by a tariff, this might not be the case, and one region could bear a greater percentage of the burden.

²² The possible exceptions to this statement will be raised in a later section of this paper. Robert Hall in “The Burden of Slavery,” unpublished manuscript, Massachusetts Institute of Technology, discusses the possibility of changes in the interest rate due to the existence of slavery, in the same way that the creation of debt can result in a real burden. (See Sutch, Richard, “Discussion of Slavery and Economic Growth,” Journal of Economic History, XXVII (December 1967), 540–41Google Scholar, for a summary of the Hall paper.) But the perfection of a market for human capital, like the creation of a mortgage market, does not change anything real except the lowering of transactions costs of borrowing or lending. This paper does not consider the issue of transactions cost changes but does implicitly reject the hypothesis in the Hall manuscript. For a discussion of the real differences between a slave and nonslave economy, see Stanley L. Engerman, “Some Considerations Relating to Property Rights in Man,” this Journal.

²³ Slave prices, deflated by the Warren and Pearson wholesale price index, rose approximately 5 percent on an average annual basis from 1850 to 1860.

²⁴ This computation involves several assumptions. The slave population is assumed to grow at a decadal rate of 22 percent. Survivor information (that is, the percent of any cohort which will survive to the next decade) from the period 1850 to 1860 was used to get the hypothetical number of slaves in each cohort which would have been in the population in 1890. The first effects of gradual emancipation are felt in 1885 when a cohort of twenty-five year-olds is emancipated. By 1890 there are no slaves between the ages of twenty and twenty-five. I also assume that childbearing is deferred by these female slaves, so that no children are bom into slavery after 1885. An equivalent assumption would be to invoke the Supreme Court's decision in Miller v. Dwilling (1826), which stated that the children of emancipated slave children were free at birth. If this held, and if those children were cared for by their mothers' masters, the costs of gradual abolition would be slightly higher than calculated here.

²⁵ I assume here mat by 1890 the percentage of slaves in the Old and New (or Upper and Lower) South is the same. In addition, the peak prices for male and female slaves in 1860 are increased at an average annual rate of 1.3 percent to 1890. Therefore, the male peak price for an average of the Upper and Lower South would have been $1772 in 1890. That for the females would have been $1275; this does not include the birth rights to the children, since those have been subtracted off by the previous exercise. For a justification of the average annual rate of increase in slave prices from 1860 to 1890 see Fogel, Robert W. and Engerman, Stanley L., “The Economics of Slavery,” in their The Reinterpretation of American Economic History (New York: Harper and Row, 1971), p. 331Google Scholar.

²⁶ Franklin, John Hope, The Emancipation Proclamation (New York: Doubleday and Co., 1963), p. 21Google Scholar.

²⁷ Klein, Herbert S., Slavery in the Americas: A Comparative Study of Virginia and Cuba (Chicago: The University of Chicago Press, 1967), p. 258Google Scholar.

²⁸ The emancipation bill for the District of Columbia appropriated $100,000 for the colonization of about 3,000 slaves. The border state proposal allotted $20 million for this deportation, and that for Missouri “pledged federal support for voluntary colonization.” See L. Curry, Blueprint.

²⁹ Staudenraus, Phillip, The African Colonization Movement, 1816–1865 (New York: Columbia University Press, 1961), p. 15Google Scholar.

³⁰ Thomas R. Dew, “Review of the Debate in the Virginia Legislature of 1831 and 1832,” in McKitrick, Eric L., Slavery Defended: The Views of the Old South (New Jersey: Prentice Hall, 1963), p. 21Google Scholar.

³¹ The supply function for southern agricultural products can be characterized as Cobb-Douglas and of the form: , where L_w, is free and L_b, is slave labor. If the wage rates for these two labor groups are the same, the total factor returns to either w or b can be expressed quite simply. For example, the total return to w is: , where P_a is the price of agricultural goods deflated by the price of all other goods in the economy. The total return to capital can be expressed similarly as: λ_k = (1 − α)P_a · Q_a · L_w in this analysis is identified with free laborers and K with slaveowners. To see the effects of compensated emancipation and colonization on λ_w and λ_k, designate two time periods, 0 and 1, the latter corresponding to the colonization case. That is, in time period 1 the only labor is L_w. If the demand function for agricultural products takes the simple form: Q_a = D_aP_a−η, the gains or losses from colonization can be easily derived. The ratio of the return to free labor in the two time periods is: . Since 0 < α < 1 and η > 0, this ratio is always >1. The corresponding ratio for the capitalists is: , which is . Therefore, capitalists gain if the demand for agricultural products is inelastic. In addition, capitalists are compensated fully for their slaves; therefore they are not losing the annual net hire rate of their now freed bondsmen.

³² Much of this section is taken from Frank D. Lewis and Claudia D. Goldin, “The Economic Costs of the Civil War,” forthcoming manuscript, Queen's University and the University of Wisconsin.

³³ See Wright, Chester W., “The More Enduring Consequences of America's Wars,” Journal of Economic History, III, Supplement (December 1943)Google Scholar for a discussion of war deaths, and A., Charles and Beard, Mary R., The Rise of American Civilization (New York: Macmillan Co., 1933), II, “The Industrial Era,” p. 107Google Scholar, for an estimate of the Northern debt created during the Civil War. The burden of the war expenditures was less than the amount given because much of the money was spent on items such as food and clothing which would have been purchased by civilians in the absence of the war.

³⁴ The persons alive in 1860 are assumed to value the consumption stream of their children and their grandchildren, and to discount it at the rate at which they would their own. The loss of consumption to immigrants who enter after 1860 is not counted in the calculation described below.

³⁵ Although this is probably an upwardly biased estimate of Civil War-related deaths, the analysis does not take into consideration some of the losses due to war wounds not resulting in death.

³⁶ I assume here that the bonds are financed in such a way that southerners are compensated for their tax burden as well as for their slave property.

³⁷ This argument will not involve bargaining problems. That is, if all costs were known, the South could “hold out” for a much larger sum. In addition, factors such as economies of scale and conspicuous consumption have already been included in the above figures. That is, if slaves afforded economies of scale in staple crop production, whereas free labor did not, then the price of slaves would reflect this advantage. The same argument applies to the possible existence of conspicuous consumption in slave owning.

³⁸ John Hope Franklin, The Emancipation Proclamation, p. 22.

³⁹ Louis Hacker's statement of this proposition can be found in the following passage: “The American Civil War turned out to be a revolution indeed. But its striking achievement was the triumph of industrial capitalism. The industrial capitalists, through their political spokesmen, the Republicans, had succeeded in capturing the state and using it as an instrument to strengthen their economic position. It was no accident, therefore, that while the war was waged on the field and through Negro emancipation, in Congress' halls the victory was made secure by the passage of tariff, banking, public-land, railroad, and contract-labor legislation.” L. Hacker, The Triumph of American Capitalism, p. 373.

⁴⁰ See S. Engerman, “Some Considerations Relating to Property Rights in Man,” this Journal.