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JUNE 23, 2019 BY JOHN HINDERAKER POWERLINE
THE BAD ECONOMICS OF REPARATIONS Last week a House Judiciary subcommittee held a hearing on reparations at which activist Ta-Nehisi Coates testified. Coates told the committee that before the Civil War, nearly half of the economic activity of the United States was generated by cotton produced by slaves. This was an implausible claim on its face, for those who know anything about the pre-Civil War economy. Had it been true, the South might well have won the war. Nevertheless, Coates’s assertion was widely repeated in the press. At the American Institute for Economic Research, Phil Magness explains the elementary fallacy that underlies Coates’s claim: Coates’s numbers come from Cornell University historian Ed Baptist’s 2014 book The Half Has Never Been Told. In a key passage in the book, Baptist purports to add up the total value of economic activity that derived from cotton production, which at $77 million made up about 5 percent of the estimated gross domestic product (GDP) of the United States in 1836. Baptist then committed a fundamental accounting error. He proceeded to double and even triple count intermediate transactions involved in cotton production — things like land purchases for plantations, tools used for cotton production, transportation, insurance, and credit instruments used in each. Eventually that $77 million became $600 million in Baptist’s accounting, or almost half of the entire antebellum economy of the United States. There’s a crucial problem with Baptist’s approach. The calculation of GDP, the main formulation of national accounts and a representation of the dollar amount of economic activity in a country in a given year, only incorporates the value of final goods and services produced. The rationale for doing so comes from accounting, as the price of the final good already incorporates intermediate transactions that go into its production and distribution. Baptist’s numbers are not only wrong — they reflect a basic unfamiliarity with the meaning and definition of GDP. (more below) |
Meet Michael P. Ramirez in Las VegasMeet Michael Ramirez in Las Vegas July 17-20 for the
"Wild West" FreedomFest conference; there will be a VIP reception where you chat with Michael about his work, and receive a very special gift. For more information, click HERE then tap the "Art Exhibit" button on the page. Michael will exhibit never before seen fine art original paintings, drawings and bronze sculpture - but only to attendees of the conference. VIP reception ticket holders will receive a personally signed book with an original ink sketch by Michael, a $100 value. So register for the conference, and make sure to sign up for the VIP reception hosted by Michael Ramirez and famed LA art provocateur, SABO, whose street artwork has taken the country by storm. Two artists, two styles that start conversations and help resolve conflicts within the culture and politics. Whiskey Politics with Dave Sussman
Dave and John Hinderaker of Powerline digest the latest big news you didn't hear; Bob Barr on the hunt, and what new health insurance freedom means for small business: |
This is not a mistake that could be made in good faith by anyone with even a passing acquaintance with economics.
When The Half Has Never Been Told first appeared in print, economists immediately picked up on the error. Bradley Hansen of Mary Washington University kicked off the scrutiny by posting a thorough dissection of Baptist’s errors on his personal blog. Economic historians Alan Olmstead (UC-Davis) and Paul Rhode (University of Michigan) chimed in with a devastating critique of Baptist’s empirics, observing that a continuation of his “faulty methodology by summing the ‘roles’ of cotton with a few other primary products” would yield an amount that “easily exceed[ed] 100 percent of GDP” in the antebellum United States — an economic impossibility.
The bottom line? Slave-produced goods accounted for “the mid to high single digits, not the 50 percent claim that Coates repeated.” In short, this is one more case of the Left making “facts” up to support its radical political agenda. read more
When The Half Has Never Been Told first appeared in print, economists immediately picked up on the error. Bradley Hansen of Mary Washington University kicked off the scrutiny by posting a thorough dissection of Baptist’s errors on his personal blog. Economic historians Alan Olmstead (UC-Davis) and Paul Rhode (University of Michigan) chimed in with a devastating critique of Baptist’s empirics, observing that a continuation of his “faulty methodology by summing the ‘roles’ of cotton with a few other primary products” would yield an amount that “easily exceed[ed] 100 percent of GDP” in the antebellum United States — an economic impossibility.
The bottom line? Slave-produced goods accounted for “the mid to high single digits, not the 50 percent claim that Coates repeated.” In short, this is one more case of the Left making “facts” up to support its radical political agenda. read more
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EXTRA:
Join Dave Sussman of Whiskey Politics as he explores why Donald Trump won the 2016 Presidential election with famed historian Victor Davis Hanson. Dave is one of our favorite television personalities, and we think you'll love his conversation with our friend Victor at his home in the Central Valley of California. |
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