---------
A commentator here says that “from 1869 to 1879, the US economy grew at a rate of 6.8% for real GDP and 4.5% for real GDP per capita. That far exceeds the growth in real GDP post WW2.”
The book cited for this data is M. Friedman and A. Schwartz, A Monetary History of the United States (Princeton, 1963), though I rather suspect it is taken via Rothbard (2002: 154), who cites Friedman and Schwartz and gives these figures.
Now I don’t have the Friedman and Schwartz book at hand (and if anyone wants to save me time by looking it up, I would be grateful), and don’t know what estimates Friedman and Schwartz were using. The standard estimates for pre-1914 real US GNP are based on the work of Simon S. Kuznets (1938, 1941, 1946, 1961), whose work was developed by Gallman (1966) and Kendrick (1961). The resulting data is normally called the Kuznets-Kendrick series or Gallman-Kuznets-Kendrick series. Presumably Friedman and Schwartz were using that, or some version of it.
But the Kuznets-Kendrick series has been challenged by modern scholars, and the best place to start is with the two widely-cited estimates of 19th century GNP by Romer (1989) and Balke and Gordon (1989).
For the period 1869 to 1879, we have these estimates in Romer (1989: 22; I have added the annual growth rates by my own calculation):
Year GNP* Growth RateNext let us look at the estimates of Balke and Gordon (1989: 84; the annual growth rates are my own calculation):
1869 75.609
1870 76.464 1.13%
1871 76.952 0.638%
1872 89.605 16.4%
1873 94.863 5.86%
1874 96.205 1.414%
1875 97.684 1.53%
1876 104.628 7.10%
1877 110.797 5.89%
1878 118.906 7.31%
1879 127.675 7.37%
* Billions of 1982 dollars
Average real GNP growth rate, 1870–1879: 5.46%.
Year GNP* Growth RateWhat conclusions can we draw from the data? We can say that
1869 78.2
1870 84.2 7.67%
1871 88.1 4.63%
1872 91.7 4.08%
1873 96.3 5.01%
1874 95.7 -0.62%
1875 100.7 5.22%
1876 101.9 1.19%
1877 105.2 3.23%
1878 109.6 4.18%
1879 123.1 12.31%
* Billions of 1982 dollars
Average real GNP growth rate, 1870–1879: 4.69%.
(Balke and Gordon 1989: 84).
(1) There was no modern data collection for GNP growth in the 19th century that is comparable to modern calculation of GNP. We can only ever have estimates, whose reliability is based on the soundness of methodology employed and surviving output data used.Now how does this compare with, say, the figures for US real GNP between 1960–1969 during the Golden Age of Capitalism? We can cite the figures here:
(2) It is astonishing how discrepant the growth estimates are. In most years there are very significant differences. E.g., in 1879 Romer has a real GNP growth rate of 7.37%, yet Balke and Gordon’s estimate is 12.31%.
(3) It is therefore clear that we will never have completely reliable figures, and that being so one should be wary of using this sort of data, except with the proviso that it is an estimate only, and we should compare the range of estimates by different scholars.
(4) the assertion that “from 1869 to 1879, the US economy grew at a rate of 6.8% for real GDP” is not supported by Romer’s data. Since I do not have figures for 1868, I cannot calculate the growth rate in 1869, but average annual real GNP growth was 5.46% between 1870–1879.
(5) By the estimates of Balke and Gordon average real GNP was 4.69% for 1870–1879, lower than the 6.8% figure allegedly cited by Friedman and Schwartz.
Year GNP* Growth RateSo in fact the average real GDP growth rate for this period from 1960–1969 is similar to that of Balke and Gordon.
1960 2,830,900 2.47%
1961 2,896,900 2.33%
1962 3,072,400 6.05%
1963 3,206,700 4.37%
1964 3,392,300 5.78%
1965 3,610,100 6.42%
1966 3,845,300 6.51%
1967 3,942,500 2.52%
1968 4,133,400 4.84%
1969 4,261,800 3.10%
* Millions of 2005 dollars.
http://www.measuringworth.com/datasets/usgdp/result.php
Average real GDP growth rate, 1960–1969: 4.43%.
This is of course only a sample of 10 years from the Golden Age of Capitalism. I will calculate the average for the 1945–1973 in another post and compare this with figures from a comparable period in the 19th century.
But there are a number of considerations to be taken into account with regard to US real GNP growth in the 19th century:
(1) the US in the late 19th century was a newly industrialising nation with growth rates higher than normal for mature Western industrialised nations like the UK in that period. In this respect, it was somewhat like China today with its very high growth rates by the standards of Western Europe or the US.Finally, if we want much better data for comparative purposes, it is far better to look at the average real GDP growth rates estimates across the whole OECD:
(2) The US had massive unused resources waiting to be exploited and mass immigration in the late 19th century, raising its population and capacity to attain economic growth.
(5) The US average real GNP growth for 1946–1973 would be a far better measure to compare with growth rates from the late 19th century (say, from 1870-1897). Balke and Gordon have estimated that for the 1869–1890 period the average US real GNP growth was 4.16% (Maddison 1995: 137). I have yet to do proper calculations using the figures of Balke and Gordon for 1870-1897, but even if it was higher than the average US real GNP growth rate for 1945-1973, factors (1) and (2) would explain this.
1700–1820 – 0.2%Of all the periods, the era 1950–1973 – the era of classic Keynesianism – had the highest estimates. Even with many Western nations experiencing industrialisation in the 19th century, they had superior real GDP growth rates from 1950–1973. As stated above, Balke and Gordon estimate that for 1869–1890 average annual US real GNP growth was 4.16% (Maddison 1995: 137), which is lower than the OECD average for the 1950–1973 period. That is to say, the mature capitalist economies under Keynesian macroeconomic management in 1946-1973 attained better average real GNP growth than the average for their industrialising phase and for that of the US too: that is quite an insight.
1820–1913 – 1.2%
1919–1940 – 1.9%
1950–1973 – 4.9%
1973–1990 – 2.5%
(Davidson 1999: 22).
N.B.: Anyone is welcome to check my calculations. Please report any errors, and I will correct them.
BIBLIOGRAPHY
Balke, N. S., and R. J. Gordon, 1989. “The Estimation of Prewar Gross National Product: Methodology and New Evidence,” Journal of Political Economy 97.1: 38–92.
Davidson, P. 1999. “Global Employment and Open Economy Macroeconomics,” in J. Deprez and J. T. Harvey (eds), Foundations of International Economics: Post-Keynesian Perspectives, Routledge, London and New York. 9–34.
Friedman, M. and A. J. Schwartz, 1963. A Monetary History of the United States, 1867–1960, Princeton University Press, Princeton.
Gallman, R. E. 1966. “Gross National Product in the United States, 1834–1909,” in Output, Employment, and Productivity in the United States after 1800 (Studies in Income and Wealth, vol. 30), Columbia University Press, New York.
Glasner, D. and T. F. Cooley (eds). 1997. Business Cycles and Depressions: An Encyclopedia, Garland Pub., New York.
Kendrick, J. W. 1961. Productivity Trends in the United States, Princeton University Press, Princeton.
Kuznets, S. S. 1938. Commodity Flow and Capital Formation, National Bureau of Economic Research, New York.
Kuznets, S. S. 1941. National Income and Its Composition, 1919–1938 (2 vols), National Bureau of Economic Research, New York.
Kuznets, S. S. 1946. National Product since 1869, National Bureau of Economic Research, New York.
Kuznets, S. S. 1961. Capital in the American Economy: Its Formation and Financing, Princeton University Press, Princeton, N.J.
Maddison, A. 1995. Monitoring the World Economy, 1820–1992, Development Centre of the Organisation for Economic Co-operation and Development, Paris.
Romer, C. D. 1989. “The Prewar Business Cycle Reconsidered: New Estimates of Gross National Product, 1869–1908,”Journal of Political Economy 97.1: 1–37.
Rothbard, M. N. 2002. A History of Money and Banking in the United States: The Colonial Era to World War II, Ludwig von Mises Institute, Auburn, Ala.
The figures he draws from are correct. Friedman and Schwartz use the Kuznet-Kendrick series, along with a couple of other comparisons. My book is at my dorm, and I’m typing this at my house right now. I do not know the exact statistics Friedman uses from the top of my head, but these are not contrived by Rothbard/the poster.
ReplyDeleteI agree with the trouble on the data, which obviously makes it hard to compare periods from post WWII with before. This is part of the argument you and I just had. It is important to remember though, that Friedman and Schwartz were not necessarily using this as evidence as the strength of laissez faire capitalism, in fact, they were quite puzzled by it! With their figures the money supply declined from 1876 to 1879 by a little under 10%, yet output grew enormously (with a wide range of variability depending on the figures). They repeatedly tried to use other statistics and figures to show the severity of the 1873 contraction, but to no avail. Even with the figures above (and other lesser, but still strong growth rates), they still concluded that the contraction was harsh but the period warrants greater study. Again, I’m at home right now and will get the figures back to you when I can.
Finally, remember that many of the same arguments you use (rapidly industrializing, massive resources, etc) were the same arguments I used for the post world war II recoveries in many nations, when many nations started industrializing for the first time, or after a long period after the stagnant 10s-40s (WWI, bad twenties, fascist 30s,WWII), etc.
Finally, it is important to note that Romer/Balke and Gordon have much more optimistic growth rates than the Kuznet-Kendritch series in the 1890s (I know you have written an article on this). In fact, if Romer was right, then the Panic of 1893 was a small blip in the radar, and if Balke/Gordon is right, than the Panic was a harsh/mild recession, but nothing close to a Depression. I find their GNP estimates quite interesting, mainly because they fly in the face of the unemployment estimates of Romer and Lebergott. The “contractions” in 1892-1894 were extremely mild compared to Kuznet series, yet the unemployment rate exploded to astronomical levels. I find this quite hard to believe. I am hoping to do a Senior Thesis on this point, especially because of the discrepancy in the data.
LK,
ReplyDeleteits on page 37...
It states:
"According to these annual estimates, net national product in current prices rose at the rate of 3.0 per cent per year from 1869 to 1879,35 and net national product in constant prices rose at the rate of 6.8 per cent per year, implying a decline in prices at the rate of 3.8 percent per year (Table 2, lines 2-4). Since population grew over the decade at the rate of 2.3 per cent per year, the implied rate of growth of real per capita income is no less than 4.5 per cent (Table 2, lines 6-7). The qualitative conclusion is the one we reached before, but the quantitative result is far more extreme. The result is rendered even more surprising by the cyclical characteristics of the initial and terminal
years. "
Here is the graph
http://i42.tinypic.com/2lxw3tk.jpg
I have the book so if you need anymore info, let me know
LK, oh and they did base their info off of Simon Kuznet's work. It states on page 36:
ReplyDelete"Beginning with 1869, annual estimates are available of net national product, in both current and constant prices, constructed by Simon Kuznets (worksheets underlying his Capital in the American Economy)"
The foot note for this sentence states:
"Most of the rest of this section is based on Friedman, "Monetary Data and
National Income Estimates," pp. 273-282."
You're talking out of two sides of your arse, LK.
ReplyDeleteOn the one hand, you say "Romer and Balke estimates are different from Kuznets, and thus Kuznets' data should be rejected and Romer's should be adopted." Why? Because Romer's estimates are LOWER than Kuznets of course! That's why your position here is "Reject Kuznets and adopt Romer."
On the other hand, you also say that the data from that period should not be trusted. But this contradicts your prior position that Romer's estimates of the data from that period are superior to Kuznet's estimates. Why? Because you want to cover your ass just in case you further learn that the growth rate during the golden age of capitalism was higher than post-WW2. That way, as of now you can say "Reject Kuznets and adopt Romer" and be right. And if the data from Kuznets is learned to be superior, then you say "All the data from that time cannot be trusted."
Even if we accept the estimates of Balke and Gordon as more reliable than those of Romer, US average real GNP growth for 1960–1969 was only slightly lower than the 10 year period from 1870–1879. In reality, of course, why select a 10 year period
You mean why select a time period that shows the golden age of capitalism had a larger growth in real GDP compared to post-WW2, instead of a time period that when averaged out, results in a lower real GDP during the golden age of capitalism compared to post-WW2? I think your readers know the EXACT reason why you would question why 10 years instead of 14.465 years that just so happens to average out to a lower number compared to some post-WW2 period of 14.465 years. LOL
(1) the US in the late 19th century was a newly industrialising nation with growth rates higher than normal for mature Western industrialised nations like the UK in that period. In this respect, it was somewhat like China today with its very high growth rates by the standards of Western Europe or the US.
ReplyDeleteFallacy. The age of an economy has nothing to do with its productivity.
These high growth rates can be achieved at any "stage" or "phase" or "age" of a market economy. They are not just limited to the "beginnings" of capitalism.
The reason why the US economy had higher growth rates than the UK was not because it was "newer" or "less mature" than the UK economy. It was because the US economy was relatively more free. When economies are more free, capital accumulates more rapidly. It's why Hong Kong's economy vastly outpaced Mainland China's growth rate from 1900-1997.
(2) The US had massive unused resources waiting to be exploited and mass immigration in the late 19th century, raising its population and capacity to attain economic growth.
Fallacy. The existence of unused resources waiting to be exploited is not a cause for higher economic growth either. Russia is one of the most "resource rich" nations in the world, and Japan is a country with relatively fewer resources, and yet Japan's economy has outpaced Russia's, because Japan's economy is relatively more free.
(3) Taking into account both (1) and (2), it is extraordinary that, by Romer’s estimates of average real GNP growth for 1870–1879, we have figures lower than in the 1960–1969 period.
Not really. When you realize that 1960-1969 had a far higher amount of government spending financed by inflation, which raises real GDP calculations. This is because nominal GDP is discounted by less than the amount of money that was printed, and is instead discounted by the rise in prices of consumer goods only. So if the government prints and spends a sum of money, and it finds its way in raising the prices of capital goods more so than consumer goods, then real GDP would be calculated as greater even if it is due to nothing but printing money.
So the "quality" of a real GDP estimate, would actually be more credible in a less inflationary economy relative to a more inflationary economy.
Finally, if we want much better data for comparative purposes, it is far better to look at the average real GDP growth rates estimates across the whole OECD:
1700–1820 – 0.2%
1820–1913 – 1.2%
1919–1940 – 1.9%
1950–1973 – 4.9%
1973–1990 – 2.5%
Of all the periods, the era 1950–1973 – the era of classic Keynesianism – had the highest estimates.
These time periods are all over the place, and my guess is that he chose 1950-1973 because it just so happened to be in between the Keynesian period of the Great Depression, and the Keynesian period of Stagflation. Picking 23 years for that cherry picked time period, but picking over 120 years for 1700-1820, and 93 years for 1820-1913, which swamps out the golden age of capitalism's growth rates of 6.8% during the 1870s, is just not credible and consistent analysis.
The author should instead choose 1 year increments, or 5 year increments, or 10 year increments, or 50 year increments, etc, AND KEEP THEM CONSISTENT.
The quality of your blog posts is rapidly deteriorating. This is one of the worst ones yet. I guess it makes sense, considering how desperate you must feel with having to accept higher growth rates during the late 19th century, than existed in the post-WW2 poop age of Keynesianism period.
This blog post has shown exactly zero reason why one should accept Romer's estimates over Kuznets' estimates.
ReplyDeleteThe dubious tactic of saying "modern economics", as if it were true that one set of economics theories and/or arguments that are newer than another set of economics theories and/or arguments somehow makes the newer set correct or more correct, is not a proper standard. For if that were true, then LK should consider Keynes' General Theory as inferior to Mises' Human Action, because Human Action is more "modern" than the General Theory.
(Part II)
ReplyDeleteI am home now, so I can check my statistics.
The figures Rothbard cites are from Freidman p.39 Table 3.
And the data is the Kuznet series you use above. You made an error with your calculation. The 6.8% is from 1869-1879, yours is from 1870-1879. (127.675-75.609/75.609)=.688/10=6.88%
Again, there is no point on commenting on the comparisons between 1945-1973, especially when you cite many of the same reasons for vigorous growth in the 1800s for what I cite post World War II.
However, I think an interesting discussion is on Romer/Balke's figures concerning the 1890s.
10 year averages for them are:
(1890-1900)
Balke: 4.4%. Relatively vigorous growth throughout. Roughly 3% drops between 1892-1894 and 1895-1896 (2.3%).
Romer: 4.4% as well, with a slight recession (less than 2% drop from 1892-1894).
Using their GNP figures, the contraction of the 1890s is much less than previously thought. As said in my earlier post, it flatly contradicts the unemployment data of Romer/Lebergott. A 1-3% contraction from 1892-1894 coinciding with an unemployment rate that ranged from 8 to 18%? As your fellow Englishmen would say (I assume you are from there judging by time zones and when you post replies, and your language :)).....Bollocks!
"Finally, it is important to note that Romer/Balke and Gordon have much more optimistic growth rates than the Kuznet-Kendritch series in the 1890s "
ReplyDeleteAnd Romer shows a moderate recession in 1870 7.387 (-4.62% contraction), and a mild recesison in 1874-1875 (-0.31 and -0.94), and agin in 1878 (-0.26%).
"LK, oh and they did base their info off of Simon Kuznet's work. It states on page 36:"
ReplyDelete(1) Do you have the precise citation for Kuznets' work?
(2) is it Kuznets, S. S. 1961. Capital in the American Economy: Its Formation and Financing, Princeton University Press, Princeton, N.J.?
(3) If so, this issue is now about the reliablity of Kuznets 1961. As anyone with a minimal understanding of this subject knows, Kuznets' work is not regarded as reliable. Why? The reason is that Kuznets' data is not annual at all. It is merely an average of 2 estimates: one in 1869 and one in 1879.
(4) With both revisions of Kuznets' data and better estimates of annual real GNP, the figures cited by Rothbard and Friedman are hopelessly out of date.
"It was because the US economy was relatively more free. When economies are more free, capital accumulates more rapidly. "
ReplyDelete(1) the UK had freer trade
(2) the US had massive protectionism throughout most of the 19th century: after the Republican party's 1856 their agenda was protectionism and government subsidies: they had a significnat influence on eocnomic policy in the US.
"When you realize that 1960-1969 had a far higher amount of government spending financed by inflation, which raises real GDP calculations."
ReplyDeleteYou are a fool: real GDP corrects for inflation.
which swamps out the golden age of capitalism's growth rates of 6.8% during the 1870s, is just not credible and consistent analysis.
ReplyDeleteThe growth rate of 6.8 is garbage: it is based on just two estimates by Kuznets in 1869 and 1879.
In Friedman and Schwartz, Monetary trends in the United States and the United Kingdom: their relation (1982), pp. 99-100, we have confirmation that were now aware of Gallman's (1966) revisions of Kuznets's 1869 figure.
Even Kendrick's early figures are unrelibale:
ReplyDeleteFor 1869-1889 Kendrick presented only decade averages, as it seemed probable that they exaggerated growth.
Angus Maddison , The world economy: historical statistics, p. 78.
"Beginning with 1869, annual estimates are available of net national product, in both current and constant prices, constructed by Simon Kuznets (worksheets underlying his Capital in the American Economy)"
ReplyDelete(1) Kuznets never published his annual estimates for 1870-1878 and 1880-1888, and only provided decade estimates from 1869-1889.
Stanley L. Engerman, Cambridge economic history of the United States, Volume 1, p. 866.
(2) even if Friedman used the unpublished estimstes of Kuznets, they need revision, as pointed out above.
"This blog post has shown exactly zero reason why one should accept Romer's estimates over Kuznets' estimates"
ReplyDeleteAbout 10 minutes of research could have shown you why Kuznets' 1869 estimate is unreliable:
"Kuznets estimates that the 1869 census understated output by 5-13 per cent, but it has been suggested that the understatement may have been as high as 18-22 percent."
Angus Maddison, Economic Growth in the West: Comparative Experience in Europe and North America, p. 203.
If Kuznets himself through this estimate was unreliable you already have a very good reason for not accepting it.
That underestimate of 1869 exaggerates the growth rates for 1869-1879 period.
LK,
ReplyDeletethis is page 36
Beginning with 1869, annual estimates are available of net national product, in both current and constant prices, constructed by Simon Kuznets (worksheets underlying his Capital in the American Economy).[30] These estimates, plotted in Chart 3, are admittedly highly tenuous for this early period, which is why we have not wished to rely on them
alone. Indeed, Kuznets himself has been most reluctant to use them except in the form of averages for groups of years, and even then
only for the study of secular trends.[31] He notes that a major reason for questioning the accuracy of the figures for the early decades is the extraordinarily large increase in estimated real income from 1869-78 to 1879-88. "The rise in gross and in net national product is close to 40 per cent of the mid-decade base. No comparable rises occur in any other decade in the period." [32] Kuznets points out that "this large rise is directly traceable to that shown for the 1869-79 decade" by the series on commodity output constructed by Shaw and incorporated
in Kuznets' estimates.[33] He cites the opinions of Shaw and Francis A. Walker that the 1869 Census of Manufactures was understated relative to the 1879 Census, quoting estimates of the extent of understatement ranging from 5 per cent to 13 per cent; but he concludes, "We did not
make the adjustment [for understatement]here, because we had no firm basis for 10 per cent in 1869 and 0 per cent in 1879, and because
the effect on the decade, averages was relatively minor." [34]
Footnotes:
[30] Most of the rest of this section is based on Friedman, "Monetary Data and
National Income Estimates," pp. 273-282.
[31] "For the early years of the period, 1869-1888, the derived annual series, even for the comprehensive aggregates-gross and net national product-did not seem sufficiently reliable as annual measures to warrant their presentation. For the next twenty years, 1889-1908, acceptable annual estimates could be derived only for the broader aggregates-national product, capital formation, and flow of goods to consumers.
"For the specific uses of our study of secular trends in capital formation and financing these annual estimates are of interest only as raw material in the calculation of five-year or more complicated moving averages which serve to cancel the short-term fluctuations while revealing the underlying secular movements and any longer swings in them with sufficient accuracy"(Simon Kuznets, Capital in the American Economy: Its Formation and Financing, Princeton for NBER, 1961, pp. 534 and 535).
See also two other works by Kuznets: National Product Since 1869, New York, NBER, 1946, especially pp. 59-90; and "Long-Term Changes in the National Income of the United States of America Since 1870," Income and Wealth of the United States: Trends and Structure, Income and Wealth, Series II, Cambridge,
Eng., Bowes and Bowes, 1952, especially pp. 34-38.
[32]Kuznets, "Long-Term Changes," p. 37.
[33]Quotation from "Long-Term Changes," p.37; see also, William H. Shaw,Value of Commodity Output Since 1869, New York, NBER, 1947.
[34]Kuznets, "Long-Term Changes," p. 38.
page 37- a little of 38
ReplyDeleteAccording to these annual estimates, net national product in current prices rose at the rate of 3.0 per cent per year from 1869 to 1879[35], and net national product in constant prices rose at the rate of 6.8 per cent per year, implying a decline in prices at the rate of 3.8 percent per year (Table 2, lines 2-4). Since population grew over the decade at the rate of 2.3 per cent per year, the implied rate of growth of real per capita income is no less than 4.5 per cent (Table 2, lines 6-7). The qualitative conclusion is the one we reached before, but the quantitative result is far more extreme. The result is rendered even more surprising by the cyclical characteristics of the initial and terminal years. According to National Bureau monthly reference dates, June 1869 was a cyclical peak and March 1879 a cyclical trough, though the subsequent upturn was so rapid that 1878 is listed as the trough year in the annual reference dates. Moreover, the contraction terminating in 1879 was the longest experienced by the United States from at
least the Civil War to the present. In consequence, a comparison between
1869 and 1879 might be expected to understate the secular rate of growth. These are among the considerations that have led Kuznets and others to question the accuracy of his estimates for the early decades.[36]
Footnotes
[35]Because of the important role played by the decennial censuses in the construction
of the estimates, the estimates for census years like 1869 and 1879 are presumably considerably more reliable and involve less interpolation than other individual years.
[36]One other study covering this period also shows very rapid growth in output. According to Gallman's estimates of commodity output, the decennial percentage rate of change in output per capita from 1869 to 1879 was higher than in the two pre-Civil War decades, and was exceeded only from 1879 to 1889 during
the nineteenth century and from 1919 to 1929 and 1939 to 1949 during the twentieth century (Robert E. Gallman, "Commodity Output, 1839-1899," Trends in the American Economy in the Nineteenth Century, Studies in Income and
Wealth, Vol. 24, Princeton for NBER, 1960, pp. 16, 19).
On the other hand, the evidence in A. F. Burns~ Production Trends in the United States Since 1870 (New York, NBER, 1934) suggests that the decade of the seventies was one of average rather than of unusually rapid growth. The medians of the trend cycles of all four of the comprehensive groups of production series he examined are, close to the exponential curves fi tted to their decade percentage rates of growth, three being slightly above and one slightly below (p. 181).
Isaac,
ReplyDeleteThanks for that.
"And Romer shows a moderate recession in 1870 7.387 (-4.62% contraction), and a mild recesison in 1874-1875 (-0.31 and -0.94), and agin in 1878 (-0.26%). "
ReplyDeleteHowever, even if you use Romer, you still would have to concede then that the 1890s were in fact a prosperous decade when you analyze her GNP calculations. Furthermore, it seems that since Balke and Gordon have revised on her work, and as far as I'm aware Romer has not disputed them (if anyone knows, it would be you), Balke and Gordon have the most up to date/accurate calculations of GNP for the second half of the 1800s.
I have read both of the papers a while ago, and looking at my notes, both of them enhanced the work of Kuznet-Kendritch. Romer noticed that the KK series uses Frickey's index as a measure of output, which is a famous output series used prior to actual GNP data collection. The problem is Frickey's Index has a much smaller quantity and scope (mostly raw materials, which are more volatile) compared to indexes used post war. From what I remember, Romer used a regression with a post war basket similar to Frickey's (i.e, less accurate), then used these differences to formulate numbers for GNP estimates.
Balke and Gordon built off of this by including direct measures of output (components method) and prices actually paid by consumers instead of wholesale prices. They also included output in construction, transportation, and communications sectors instead of raw commodity output data (what Kuznet uses). Since I'm unaware as to whether their data has been challenged in the same way Romer's was challenged by theirs, it seem that they have the best representation of output data.
And like I said before:
"
Using their GNP figures, the contraction of the 1890s is much less than previously thought. As said in my earlier post, it flatly contradicts the unemployment data of Romer/Lebergott. A 1-3% contraction from 1892-1894 coinciding with an unemployment rate that ranged from 8 to 18%? As your fellow Englishmen would say (I assume you are from there judging by time zones and when you post replies, and your language :)).....Bollocks! "
So with the Balke and Gordon output measures, the growth rates in the 1870s and 1890s were quite good. Particularly, this could prove a problem for proponents of the debt deflation hypothesis, especially since large bankruptcies, falling prices, and contracting money supplies (1876-1879) followed after these Panics.
2/2
ReplyDeletewhich swamps out the golden age of capitalism's growth rates of 6.8% during the 1870s, is just not credible and consistent analysis.
The growth rate of 6.8 is garbage: it is based on just two estimates by Kuznets in 1869 and 1879.
In Friedman and Schwartz, Monetary trends in the United States and the United Kingdom: their relation (1982), pp. 99-100, we have confirmation that were now aware of Gallman's (1966) revisions of Kuznets's 1869 figure.
You are a sophist and a liar.
Gallman's conclusion was that Kuznets' estimates for 1869 and for 1979, and the suspected low estimate for 1869 which was suspected of driving a bias upward in growth rates, nevertheless "had insignificant effects on the aggregates."
Some of Gallman's notable conclusions are:
"Kuznets believes that the 1869 benchmark figure is short because of deficiencies of the Census. For this reason, his 1869 GNP estimate is too low, but probably less than 10 per cent too low. The effect of this, in turn, is to make the decade average GNP estimate for 1869-78 short by something under 5 per cent and to give the rate of change of the series a slight upward bias."
OK, so a 6.8% estimate revised downward by 5% is 6.46%.
Still higher than post-WW2.
"There are several reasons for believing that Kuznets overestimated the effect of deficiencies of the 1869 Census on his series. He gave some weight to Census Commissioner Walker's estimate that returns were short by 13 per cent; but Walker attributed the shortage to poor returns of the hand trades, especially the construction hand trades. Shaw and Kuznets made no use of these data."
"Kuznets also took into account Shaw's estimate that the 1869 returns were low by about 5 per cent, chiefly because several minor industries were omitted from the canvass. Study of Shaw's tables shows that the industries covered in 1879 but apparently left out in 1869 accounted for only about 2.7 per cent of final product in 1879. Almost half of the total is due to the mixed textiles industry, unenumerated in 1869, according to Shaw. It is likely that the product of this industry was counted in 1869, but was included with the product of the cotton and woolen industries. Apparently this is what happened in 1879."
Source: "Gross National Product in the United States, 1834—1909," Robert Gallman, 1966
In other words, Gallman believed that Kuznets himself overestimated the effects of his own deficiencies, which means Gallman, if anything, holds Kuznets' estimates as being too conservative even to Gallman.
And your pathetic claim that Kuznets' estimates are so bad as to be rejected, on the basis of Gallman's revisions, makes it clear that you're not interested in honest debate.
Regarding the 1890s, I have already covered that here:
ReplyDeletehttp://socialdemocracy21stcentury.blogspot.com/2011/01/us-gnp-estimates-in-recession-of-1890s.html
^I know Lord Keynes, I said in my first post I know you wrote an article on this. But:
ReplyDelete"
Using their GNP figures, the contraction of the 1890s is much less than previously thought. As said in my earlier post, it flatly contradicts the unemployment data of Romer/Lebergott. A 1-3% contraction from 1892-1894 coinciding with an unemployment rate that ranged from 8 to 18%? As your fellow Englishmen would say (I assume you are from there judging by time zones and when you post replies, and your language :)).....Bollocks! "
"Using their GNP figures, the contraction of the 1890s is much less than previously thought. As said in my earlier post, it flatly contradicts the unemployment data of Romer/Lebergott. A 1-3% contraction from 1892-1894 coinciding with an unemployment rate that ranged from 8 to 18%?"
ReplyDeleteThere is no necessary contradiction at all, old chap:
http://socialdemocracy21stcentury.blogspot.com/2011/12/us-recessions-of-1890s-in-balke-and.html