Northern Agriculture and Westward Expansion

1. Northern Agriculture and Westward Expansion

2. Accounting for Growth • Between 1840-1860, • 49% growth due to growth in Labor • 26% growth due to growth in Capital • 10 % growth due to growth in Land • 15% growth due to growth in Productivity • Most of population still in agriculture

3. Increases in Agricultural Productivity • Growth of Markets due to reduction in transportation costs • New Land • Technological Change • Mechanization • New techniques • Plant breeding

5. Land Policy • Louisiana Purchase of 1803 doubled the size of country • New Questions • Distribution of Public Land • Government of new territory

6. Land Distribution • Sell land at full market value • Federalist idea increase revenue to central government • Sell land below market value • Jeffersonian ideal of a nation of small farmers • Small lots, low prices, credit • Both systems create opportunities for rent seeking behavior

7. Set price at profit maximizing level creates rents for existing government • Demand curve may not be known • Low price encourage speculators • What happens when price is set below the market level? • Qd>Qs, rationing of some type is necessary

8. Pattern of settlement • New England model-orderly settlement • Land Ordinance of 1785 • Surveyed parcels, public auction • Lots of corruption • Difficult to enforce rules • Lots of Changing rules • Federal Government never makes much money

9. Distributional effects • If land in West is better than the East • Wages rise • Rents in East decline • Fogel and Ruttner model

10. Too much cheap land? • Were settlers rational? • Returns of agricultural investment about the same as other investments • Cost of land was a small part of farm • Clearing land, capital, transportation costs • Land speculation • Informational asymmetry • Some got rich, some did not

11. Increases in Agricultural Productivity • Parker and Klein • Divided labor productivity into three part • # acres plowed and harvested per worker • Yield per acre • # of bushels threshed and prepared for market per worker • Used this to come up with labor productivity data for three crops, oats, corn and wheat

13. Results • Oats- Q/L increased 365 percent from 1840-1860 to 1900-1910 • Wheat- Q/L increased 417 percent from 1840-1860 to 1900-1910 • Corn- Q/L increased 363 percent from 1840-1860 to 1900-1910

14. Where did most of this increase come from? • Assume increases acres plowed, harvested threshed came from mechanization • Increases in yield per acre came from selective breeding and changes in location • Find that most of increase comes from mechanization

15. Mechanization • Plows • Wood • Cast Iron 1820s • Steel plows 1840s • Mechanical Threshing 1830s-1840s • Mechanical reaper invented in 1833-34 • Harvesting is time critical

16. Reaper • By 1850 only 3,373 sold • 1845-1857 73,200 sold • Most after 1850 (70,000) • Why was diffusion so slow until 1850 and then speeds up?

17. What size farm will use Reaper • Must be large enough (graph) • Why not increase size? • Cost of land • Cost of labor • Lack of demand • Suggests reapers not used earlier because wages were low and demand was low

18. Paul David • Was St> actual farmsize • Did something happen in 1850 to change St or farmsize?

19. Computing threshold size • Cost of reaper was • C=(d+i)Pr • D=depriciation • i=interest rate • Pr=price of reaper • Benefit • B=StLsW • St=threshold size • Ls=labor saved • W=wage

20. Benefit=Cost • StLsW=(d+i)Pr • St=((d+i)/Ls)(Pr/W) • Given d, i, Ls in find relationship between St and (Pr/W)

21. Acres In 1850 Average farm size in Illinois is 15-16 acres. Because of W increase, St fell to 35 by 1857, average farm size increase to 25-30 46.5 35 Pr/W 73.8 1857 97.6 1850

22. Increases in Demand • Increase in farm size caused by increase in demand from Europe • Increase use of Railroads cause reduction in transportation costs

23. Olmstead’s Criticism of David • How sensitive is the estimate of St on assumed values for d and i? • Depreciation depends on average life of reaper • David 10 years, Olmstead 5 years • Interest rates • David 6%, Olmstead 10% • Olmstead St 1850 89.4 1857 67.6

24. Average farmsize Vs distribution • Lewis Jones • Looks at distribution of farms to find number of farms above St • Manuscript Census data • Finds if David is correct there are too few reapers and if Olmstead is correct there are too many

25. Sharing • Was it possible to share reapers? • Problems • Common property • Opportunistic Behavior • Who’s crop is harvested if the storm is coming? • Evidence suggests sharing did occur • Rental market for reapers • Reapers adoption probably demand driven

26. Was Mechanization only important source of productivity advance? • The Red Queen and the Hard Reds: Productivity Growth in American Wheat, 1800-1940 • Alan L. Olmstead and Paul W. Rhode • The Journal of Economic History, Vol. 62, No. 4 (Dec., 2002), pp. 929-966

27. Wheat production from 1839 to 1909 increased from 85 million to 640 million bushels • Geographic area changed

30. Problem with Parker-Klein • In 1839 not much data, so the western region is defined as anything west of Ohio • Do not have data on hours per acres for west in 1839 • Assume no change

32. Ignores role of biological changes in seeds which allowed wheat to be grown in these region • Also ignores role of biological changes in seeds in maintaining yield • Red Queen

33. Climate is very different in these areas

34. Need new varieties of wheat • To with stand different climate • Also to with stand disease • Curse of the Red Queen • Rust • Problems as early as late 1600s • Loss 10-15 % in normal year, could be as high as 30% in epidemic year • Insects like the Hessian Fly • Needed to be able to plant wheat earlier

35. Wheat varieties Evidence for lots experimentation. Most varieties grown in 1920 are new

36. Source of New Varieties • Seed companies • US and State Departments of Agriculture