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Capital in the Nineteenth Century

Author(s):Gallman, Robert E.
Rhode, Paul W.
Reviewer(s):Margo, Robert A.

Published by EH.Net (March 2020)

Robert E. Gallman and Paul W. Rhode, Capital in the Nineteenth Century. Chicago: University of Chicago Press, 2019. xvi + 381 pp. $65 (hardcover), ISBN: 978-0-226-63311-4.

Reviewed for EH.Net by Robert A. Margo, Department of Economics, Boston University.

The late Robert Gallman (1926-1998) was one of the original cliometricians and, more generally, one of the leading scholars of social science in the twentieth century. We are all familiar with Deirdre McCloskey’s “Fifty-Year” Rule — will anyone read and/or cite Professor X’s work in 50 years? I predict our descendants will be reading and citing Gallman’s works, particularly those on the measurement of long-run economic growth in the United States, into the indefinite future. The volume under review is issued in the National Bureau of Economic Research’s on-going monograph series, “Long-Term Factors in Economic Development.” Gallman’s co-author, Paul Rhode, is Professor of Economics at the University of Michigan, and an NBER Research Associate.

Gallman worked on the subject matter of Capital in the Nineteenth Century — the growth of capital and national income in the United States during the “long” nineteenth century — his entire professional life. At death he left published articles, worksheets, partial and completed unpublished manuscripts. When alive Gallman would dole out copies of unpublished works to inquiring scholars, always with a polite but stern warning to limit uses of his numbers to those for which he deigned them worthy (your faithful reviewer was a recipient, as mentioned briefly on p. 104 of the book). Paul Rhode was Gallman’s colleague at the University of North Carolina. He has collected, reviewed and edited the various articles and manuscripts; written complementary text where necessary; and assembled the disparate parts into a coherent whole — this book. We are in Paul’s debt.

Capital is divided into a Preface, fourteen substantive chapters, and a conclusion (“Wrapping Up”). There are tables, usually many and often detailed, in every chapter — many more tables than figures (Gallman, Rhode tells us, preferred the former). The writing is not in one voice throughout — how could it be? — but it is easy to tell Rhode from Gallman; and, while I am sure that Gallman, were he still with us, would have wanted to polish some of the prose, it is more than serviceable throughout.

Chapter One, “Robert Gallman’s Capital Stock Project,” introduces the subject matter, recounts the origins of the volume, gives capsule summaries of each chapter, and outlines the major substantive findings. These major findings, all well known, are that the capital-to-output ratio rose sharply over the long nineteenth century, as did the savings rate. The rise in the capital-to-output ratio went hand in hand with a sharp fall in the relative (to output) price of capital goods. Industrialization per se does not explain capital deepening because agriculture was actually more capital intensive than other sectors, and agriculture’s share of output declined over time. Rather, one should interpret “industrialization” as a broader process including the transportation revolution and (especially) urbanization, both of which did mobilize large amounts of capital. Chapter Two (by Rhode, like Chapter One) brings together the first order numbers, census-style (and frequency) of the capital stock, and also those of national wealth.

The next four chapters elaborate on the implications of the first two. Chapter Three is essentially the same as Gallman’s 1986 chapter (“The U.S. Capital Stock in the Nineteenth Century”) in the Engerman and Gallman NBER volume, Long-Term Factors in American Economic Growth, with some reordering and slight revision by Rhode, and re-computation of growth rates from the original paper to make them consistent with those presented elsewhere in the book. The estimates in Chapter Three cover the period 1840 to 1900. Like Chapter Three, Chapter Four was also previously published (in the 1992 Gallman and Wallis NBER volume, American Economic Growth and Standards of Living Before the Civil War) and is also reordered, slightly revised, and has newly computed growth rates. It extends the analysis of the capital stock and associated growth backward to 1774, thus covering the early national period, and forward to 1980. For most readers, Chapter Five provides compelling reason alone to buy the book; it presents Gallman’s annual estimates of national income from 1834 to 1909. The last sentence of the chapter reiterates Gallman’s admonition: “[t]hese data were not constructed for analysis as annual series.” Chapter Six, which originally appeared in the 1987 volume (Quantity and Quiddity) honoring Stanley Lebergott, uses annual flow data cum perpetual inventory methods to generate capital stock estimates, which Gallman viewed as a useful check on his primary numbers.

Chapters Seven through Thirteen focus on particular sectors or components of the capital stock: Agriculture (Chapter Seven), Mining and Manufacturing (Chapter Eight), Nonfarm Real Estate and Trade (Chapter Nine), Transportation (Chapter Ten), Communication and Electric Utilities (Chapter Eleven), Inventories (Chapter Twelve), and Consumer Durables (Chapter Thirteen). For specialists, the chapters are a godsend (in my professional capacity as specialist in historical manufacturing as opposed to reviewer, I will be studying Chapter Eight word for word), and each provides much food for thought for the non-specialist. Regarding such food, I am especially fond of Chapter Thirteen, which demonstrates that the “consumer revolution” of the twentieth century began in the nineteenth, with the humble but ubiquitous cast iron stove as the iconic example. Chapter Fourteen provides further details on wealth in colonial America and the early nineteenth century, and Chapter Fifteen briefly concludes.

Gallman was a titan and his decades-long project on the American capital stock is one of the great wonders of the world of the economic history. Its status, though, should not cause economic historians to assume that Gallman is the last word. To the contrary, it is the deep and abiding obligation of every generation of economic historians to revisit earlier works, using better data and methods (if available) to revise and rewrite, if such proves necessary. Even a Robert Gallman occasionally got things wrong. In a recent article, Jeremy Atack and I (Atack and Margo 2019) revisited Gallman’s estimates of nineteenth century manufacturing output, arguing that it was incorrect to exclude, as he did, the output of the so-called “hand trades” — for example, blacksmithing. Correcting this has only a minor effect on the aggregates but including blacksmithing and the other hand trades in the narrative (and the numbers) illuminates the transition from small to large scale production and specialization of labor that was a key hallmark of early industrialization. Paul Rhode’s tireless and now completed effort to present Gallman’s project in a comprehensive whole makes this kind of re-evaluation much easier to accomplish. Capital in the Nineteenth Century belongs on the bookshelf of every economic historian interested in the processes of long run growth, which is to say all of us.

Jeremy Atack and Robert A. Margo. 2019. “Gallman Revisited: Blacksmithing and American Manufacturing, 1850-1870,” Cliometrica 13 (January): 1-23.

Robert A. Margo is Professor of Economics at Boston University, a Research Associate of the National Bureau of Economic Research, and a former President of the Economic History Association (in 2014-15).

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Subject(s):Agriculture, Natural Resources, and Extractive Industries
Income and Wealth
Industry: Manufacturing and Construction
Transport and Distribution, Energy, and Other Services
Urban and Regional History
Geographic Area(s):North America
Time Period(s):19th Century