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U.S. Slavery and Economic Thought


Chattel slavery involves the ownership by one person of another. This entry focusses on the operation of that labor system in the United States. Although chattel slavery dates back to the dawn of civilization, in the area that became the United States it emerged after the importation of Africans to the Virginia colony in 1619. Prior to the American Revolution, all British colonies in the New World legally or informally sanctioned the practice. Nearly every colony counted enslaved Africans among its population. Only during and after the Revolution did the northern states abolish the institution or begin to implement gradual emancipation. But slavery was more economically entrenched in the southern states and became more so over time. By the outbreak of the Civil War in 1861, slaves constituted one-third of the total slave-state population of 12.3 million.

Slavery has captured the attention of economists since at least the eighteenth century. Two basic questions have remained intertwined throughout the history of economic thought regarding this ancient institution. First, was slavery profitable? And second, was slavery efficient? Was it profitable to individual slaveholders, in the sense of offering a reasonable prospect of monetary return (or some other material reward) comparable to what they could earn from other enterprises? Efficiency refers to overall economic gains. Did the exploitation of slave labor allocate and use resources in ways that fostered aggregate wealth and welfare, regardless of how unfairly it distributed wealth? Did it produce goods and services as abundant and valuable as alternative labor arrangements could have? Often economists and historians have reached identical answers to both questions, concluding that either slavery was both unprofitable and inefficient or both profitable and efficient.


Classical Economists

Many classical economists, starting with Adam Smith, contended that slave labor was inefficient and, therefore, usually unprofitable. Smith’s discussion of slavery appeared in The Wealth of Nations (1776). “[G]reat improvements,” he wrote, “are least of all to be expected when they [proprietors] employ slaves for their workmen. The experience of all ages and nations, I believe, demonstrates that the work done by slaves, though it appears to cost only their maintenance, is in the end the dearest of any.” Smith implicitly assumed that slavery operated like a tax on work. But if this is correct, why had slavery persisted for millennia? The answer Smith gave was that “[t]he pride of man makes him love to domineer.” In other words, a kind of conspicuous personal consumption causes employers to “prefer the service of slaves to that of freemen,” but with an important caveat: only “[w]herever the law allows it, and the nature of the work can afford it . . .” Smith believed that slavery was a major cause of the economic stagnation in the ancient and medieval eras. But by his time, he noted, this backward labor system flourished only in the production of such staples as sugar and tobacco, which enjoyed exorbitant returns and government protections. [1]

Not every early economist entirely agreed with Smith that slavery was usually unprofitable, but the condemnation of slavery as inefficient was almost universal among those economists who discussed the question at length. These included Anne-Robert-Jacques-TurgotJean-Baptiste Say, Heinrich von Storch, Jeremy Bentham, John Stuart Mill, and John Cairnes. The classical economists also usually integrated their economic analysis with an overall moral condemnation of slavery. When Thomas Carlyle attached the sobriquet “dismal science” to economics, he was reacting not to Thomas Malthus’s pessimistic projections about the effects of future population growth, as frequently presumed. The term “dismal science” first shows up in Carlyle’s anonymous 1849 essay, “Occasional Discourse on the Negro Question.” Classical economists, to his disgust, had played a major supporting role in ending slavery within Britain’s West Indies colonies more than a decade earlier. That is why he regarded economics as “dismal.”[2]


The Cliometric Revolution

As late as 1918 in American Negro Slavery, U. B. Phillips, a historian (and open racist), used trends in slave and cotton prices in the pre-Civil War United States to support his assertion that slavery had become unprofitable. The earliest scholarly challenges to the view that slavery was unprofitable and inefficient came from historians, notably L. C. Gray (1933) and Stampp (1955).[3]

But it was the practitioners of the “new economic history” or “cliometrics” who most forcefully contended that slave labor was profitable and efficient. Conrad and Meyer in the Journal of Political Economy (“The Economics of Slavery in the Ante Bellum South,” 1958) touched off the cliometric revolution, with its sophisticated and rigorous quantitative methods. They concluded that slavery was in fact remunerative for the average slaveowner. After much back-and-forth debate, within over thirty published items in the technical literature, that finding at least was firmly established. Slave labor produced an income stream equal to a slave’s output minus the cost of the slave’s subsistence, maintenance, and management. Market competition drove slave prices to the present value of this expected future income stream, discounted at prevailing interest rates.  The average return on slaves in the American South, therefore, hovered between 8 and 10 percent, comparable to the antebellum return on capital throughout the U.S. [4]

By the mid-1850s, prices of prime field hands were upwards of $1,200, or about $40,000 in 2020 dollars, and the figure was sensitive to anything that could affect the slave’s future labor: health, skills, gender, reliability—with age the most important. Prices generally peaked when a slave reached his or her mid-to-late twenties, and then fell off along with the expected number of remaining productive years. A skilled blacksmith commanded a 55 percent premium over the price of a prime field hand, whereas a disabled or unreliable slave would sell at a discount of up to 65 percent. Prices of twenty-seven-year-old females averaged 80 percent of the prices of male slaves of the same age.

The most influential work arguing that slavery was also efficient is Robert Fogel and Stanley Engerman’s Time on the Cross (1974). Fogel and Engerman (hereafter F&E) synthesized and refined previous work. They went much further in their conclusions, however, claiming that slave plantations had been 40 percent more efficient than northern free farms; that planters had relied less on coercion than previously supposed; that the material well-being of American slaves compared favorably with that of urban free laborers in the North and Europe; and that generally antebellum slavery had been a model of economic rationality. [5] Such claims raised objections from both historians and economists, and an avalanche of subsequent literature resulted in a rich, interdisciplinary debate, including three new volumes: Gutman, Slavery and the Numbers Game (1975); P. David et al., Reckoning with Slavery (1976); and Wright, The Political Economy of the Cotton South (1978). The objections did not always perfectly coincide with each other. But with respect to the slavery’s efficiency and the treatment of slaves, the dissenters at least dampened F&E’s bolder assertions. This debate culminated in Fogel’s Without Consent or Contract (1989), reinforced by no less than three volumes of supporting articles and evidence from a range of authors.[6]

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Profitability versus Efficiency

Despite the apparent relationship between profitability and efficiency, there are many obvious cases, from piracy through monopoly to government subsidies, where individual gains do not translate into net benefits for the economy. Yet all but overlooked in the ongoing debate over slavery was a group of economists who, while diverse in their analyses, most emphatically de-coupled the concepts of profitability and efficiency, notably Moes (1960, 1962), Tullock (1967), Sowell (1981), and M. Thornton (1994). A recognition that government interventions may also have been crucial to slavery’s viability had been proposed by Mises (1966), R. Evans (1970), Barzel (1977), and Fenoaltea (1984).[7]

One state intervention highlighted by several of these writers was restrictions on slaveholders freeing their own slaves. In many past slave systems, manumitting slaves had been prevalent. Indeed, slaves purchasing their own freedom was common both in ancient and Latin America slavery. But the slave systems of the British West Indies and the southern United States imposed extensive legal barriers to masters freeing their own slaves. These barriers, as the distinguished historian of slavery D. B. Davis (1968) noted, constituted “the most important distinction between the legal status of slaves in British and Latin America … only in the Southern United States did legislators try to bar every route to emancipation and deprive masters of their traditional right to free individual slaves.”[8] The economic impact of these restrictions is explored below.

Strictly speaking, economists usually and most broadly employ the term “efficiency” as a measure of welfare rather than of output. Thus, while economic historians now agree that antebellum slavery marginally increased the output of cotton and other products, it still could have diminished total welfare. In measuring efficiency, economists have no precise unit to compare the subjective gains and losses from involuntary transfers. But because most coercive transfers in the Old South were from poor slaves to rich slaveholders, to assume unrealistically that such transfers were a wash in which slaveholder gains equaled slave losses is to bias the analysis in favor of slavery. Thus, if welfare losses still exceed gains, even with this bias present, one can be certain that slavery was inefficient. Hummel, in his dissertation, “Deadweight Loss and the American Civil War” (2001, updated 2012), integrated previous work into a systematic challenge to slavery’s efficiency.[9] He identified three sources of deadweight loss: output inefficiency, classical inefficiency, and enforcement inefficiency.


Output Inefficiency

The slaveholder was like an employer of free labor with extra options. Masters had two ways to motivate their slaves: the positive incentives of free labor or negative incentives employing force and violence. Slaveholders thus confronted a classic trade–off.  They would tend to choose whichever incentive was cheaper at the margin. Because coercion itself requires labor, as well as other resources, not to mention possible loss of output from injuring or killing the slave, it was not always cheaper than paying an implicit wage. Not all of a slave’s labor was coercively extracted. American slaves not only were fed and housed, but also sometimes received other payments. Slaveholders found positive incentives to be less costly for jobs requiring greater skill, initiative, or self–discipline. In towns and cities, where such jobs were more common, the practice of hiring out slaves and giving them a fixed sum or percentage became well established. Slaves who were skilled carpenters, masons, or other artisans often could “hire their own time,” that is, choose their own employers. Some lived separately from their masters.

Indeed, Time on the Cross initially identified these positive incentives as the source of slavery’s alleged efficiency. But Fenoaltea, “The Slavery Debate: A Note From the Sidelines” (1981), exposed the logical tension in attributing slavery’s productivity to how well slaves were treated. If slave labor was, in fact, more physically productive in agriculture than free labor, this could not possibly be the result of monetary payments to slaves or other positive incentives, because those are the precise incentives slavery shares with free labor. The ability to coerce the slave was its only possible advantage over free labor. Eventually F&E shifted ground by focusing on the gang-labor system that drove slaves to accomplish as much “in roughly 35 minutes as a free farmer did in a full hour.”[10]

The choice between positive and negative incentives depended on the type of work. This divided the Old South’s labor market into three sectors. The sector where positive incentives were less costly was dominated by free labor. In the sector where the trade-off was close, slave and free labor went head-to-head in competition, as among skilled artisans and in southern factories.  The labor market’s third sector was plantation agriculture, where motivating workers with punishments was generally less costly. Nearly three-quarters of all slaves toiled in this sector. Plantations run with wage labor were virtually non-existent in all slave societies, and very rare after emancipation.

Because coercion was what made plantation slaves more productive than free farmers, slavery operated like a tax on leisure.  Slaves were being pushed off their preferred labor-leisure trade off, forcing them to work harder and/or longer than they otherwise would have chosen. This increased labor input caused output to increase but welfare (economic well-being) to decrease. Measuring this welfare loss requires some estimate of the wage a free laborer would have required to be willing to work at the same pace. F&E actually offered such an estimate, using it to derive a total loss of slave income of $84 million in 1850. This was only partly offset by the planters’ gains from the increased cotton output, leaving a total net loss for the southern economy of $74 million, or around 10 percent of the South’s regional income. Hummel, working with alternative estimates from other scholars, comes up with an estimate of the deadweight loss from output inefficiency of between $38 million and $176 million during the same year, 1850. (Note to readers: These numbers may sound amazingly low. Keep in mind, though, that the 1850 dollar was worth approximately 33 times the value of a dollar in 2022 and also remember that the overall southern economy was tiny compared to the one today.)

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One confirmation of slavery’s output inefficiency is the post-Civil War’s significant decline in southern output and income per capita. The real value of total commodity output (agriculture, manufacturing, and mining) in the eleven defeated Confederate states did not return to its 1860 level until nearly two decades later and, since population had also risen, real output per person in 1880 was almost 20 percent below prewar levels. Another extended cliometric debate is about the reasons for this. But among the several explanations put forward by economic historians, there is a consensus that wartime destruction cannot come close to explaining the magnitude and duration of this collapse. One factor that clearly played a role, proposed by Ransom and Sutch (1975; One Kind of Freedom, 1977), was the decline in the labor input from former slaves, which fell by almost one-third.[11] This is further evidence that slavery pushed the slaves off their preferred combination of labor and leisure.

The total value of all slaves as of 1860 is estimated at between $2.7 and $3.7 billion, making it one of largest capital assets in the U.S. at the time. Emancipation returned all this human capital from slaveholders to the freed slaves. Despite still facing onerous legal and social disabilities, the former slaves took more leisure. Women and children abandoned the fields and the elderly were no longer required to work, whereas males gained more control over their labor input through sharecropping and other new less-demanding arrangements. Although F&E attributed the resulting fall in output to emancipation’s destruction of plantation agriculture, with its economies of scale, those apparent scale economies were instead the result of overworking the slaves. This explanation is consistent with what happened in other post-emancipation societies, such as Haiti and the British West Indies. In short, one of the major sources of the fall in output is the same as the source of increased welfare.


Classical Inefficiency

Slavery’s classical inefficiency resulted from restrictions on slaveholders freeing their slaves. These restrictions had been in place since the colonial period and were only briefly relaxed in the upper South after the American Revolution. By the time of the Civil War, seven slave states had gone so far as to outlaw manumission without specific legislative approval.[12] The South’s free-labor sector tended to comprise jobs requiring initiative, discretion, and diligence—in other words, jobs that commanded higher wages because the output had greater market value. Many African Americans, if free, might have performed these well–paid jobs. They therefore could have produced either of two possible streams of future output—one less remunerative while slaves and one more remunerative while free. Such a discrepancy made possible a mutually profitable deal for a slave to buy freedom from his or her owner.

Why did slaveholders erect such barriers when it was in their individual self–interest to permit self–purchase? One reason is that a large and prosperous free black community would have made it easier and more appealing for slaves to escape or resist. As the free black populations grew in Delaware and Maryland after the Revolution, for example, the threat of runaways sped up the process of voluntary manumission. By 1860, 90 percent of Delaware’s African Americans were already free, and in Maryland, half were. Insofar as restrictions on manumission confined laborers to lower-valued jobs, it lowered output and simulated the impact of a high marginal tax rate on work. It also stifled the creation of human capital among African Americans and contributed to the South’s lack of urbanization, two economic costs of slavery brought up by many of F&E’s critics. Thus, many slaves were less productive than they would have been if free, just as classical economists had surmised.


Enforcement Inefficiency

Slavery also necessitated enforcement costs beyond those entailed by free labor. This converted slavery’s enforcement into an added expense for the region. Without slavery, these resources would have been used in other endeavors. The most that can be said about this additional cost is that it was offset by the output it generated—so long as each individual planter covered his own security costs. Even this ceased to be true, however, if slaveholders could impose part of the costs on non–slaveholding whites.  And that is what they did.

The chief way that state and local governments externalized enforcement costs was the use of slave patrols. Loosely connected with the local militia, patrol duty was compulsory for most able–bodied white males. Exemption usually required the exempt person to pay a fine or hire a substitute. The slave patrols thereby affixed a tax-in-kind upon small slaveholders and poor whites who owned no slaves.[13] As a result, coercion was now less expensive for large slaveholders, so that the trade–off between positive and negative incentives was shifted toward coercion. This worsened the slave’s lot and caused expenditures on enforcement to exceed gains to planters. But because planters did not bear these costs, they did not oppose such expenditures. Using the slave patrol fines imposed in all but three of the slave states, Hummel estimated the total annual opportunity cost of patrol duty to be $4.5 million, providing a lower-bound estimate of the deadweight loss from enforcement inefficiency.

Both the national government and the free states also subsidized slavery’s enforcement through Fugitive Slave Laws, which required the return of slaves fleeing north. Because the U.S. Censuses for 1850 and 1860 reported only about 1,000 runaways per year, no more than 0.03 percent of the total slave population, the economic (as opposed to political) significance of these laws was underrated. Franklin and Schweninger (1999), Hummel (2001, 2012) and Hummel and Weingast (2001, 2006) showed that the census data were unreliably low and that the raw numbers were misleading. Women and children were a lot less likely to run away; the danger of escape was concentrated in primeage males. A slave’s initial distance from the free states also mattered, with runaways concentrated in the upper South. Out of the total slave population in Maryland, these adjustments suggest, the proportion of prime males reported escaping in the 1850 Census was 1.5 percent. Without Fugitive Slave Laws, percentages would have been higher.[14]

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The New History of Capitalism

By the twenty-first century the slavery debates among economists had become quiescent. One major subsequent contribution is Olmstead and Rhode’s “Biological Innovation and Productivity Growth in the Antebellum Cotton Economy” (2008). They found that average daily cotton-picking rates quadrupled between 1801 and 1862, mainly due to new cotton varieties. But among historians, those describing their own work as part of a “New History of Capitalism” now claim that slavery was the primary source of overall U.S. economic growth in the antebellum period. Two of their major works are Beckert’s Empire of Cotton (2014) and Baptist’s The Half Has Never Been Told (2014). [15] While embracing the finding that slavery was productive, these historians otherwise largely ignore all previous work of economists. Yet the idea that slavery was essential for cotton production, which drove national growth, is belied by the fact that just five years after the Civil War’s end the physical amount of cotton produced was approaching its prewar peak, mainly because of increased acreage devoted to cotton cultivation, despite the fall in southern real income.

Baptist went so far as to ignore Olmstead and Rhode’s explanation for the increase in cotton-picking rates, attributing it instead to a whipping regime of calibrated torture, steadily increasing over sixty years. Horrendous as torture is, the claim that it could account for productivity continually increasing for more than half a century is implausible on its face. Ignorance of national income accounting and Baptist’s double counting led him to attribute almost half of U.S. economic activity in 1836 to cotton production. Although cotton was the largest U.S. export, it never exceeded 5 percent of GDP. Olmstead and Rhode (2018) offers a comprehensive and scathing critique of the New History of Capitalism’s works on slavery.[16]



Economists have done significant research into many other questions about American slavery not treated in this entry. These include slavery’s impact on regional rates of economic growth, the workings of the interstate slave trade, the demographics of the slave family, and slave health and nutrition. But focusing on slavery’s profitability and inefficiency exposes the true horror of this labor system. Slavery inflicted on African Americans tremendous pain, suffering, and sometimes death, along with other less brutal burdens such as lost income. This massive decline in welfare from output inefficiency did increase the South’s production of cotton and other goods, but classical inefficiency had the opposite effect on the South’s total output. The misallocation of African American labor through restrictions on manumission made non-slaveholding southern whites poorer as well, as did their burden from the enforcement inefficiency of mandatory slave patrols.  The net effect on the South’s purely monetary income per capita is difficult to pin down. But suggestive is the fact that income per capita in the slave states (counting slaves) remained more than 25 percent lower than that of the free states throughout the three decades leading up to the Civil War.  Moreover, planters who extracted enormous coercive transfers from slaves earned rates of return no greater on average than northern merchants and manufacturers. Nonetheless, slaveholders had so much wealth tied up in this human capital that they were willing to invest considerable resources and eventually fight tooth and nail to preserve a system that provided them only market returns.

The ultimate beneficiaries of slavery were those who could buy cheaper cotton textiles or other consumption goods, the output of which was increased by slave labor. The New History of Capitalism has grossly exaggerated these gains in order to magnify slavery’s exploitation. But unlike economists, these historians fail to think at the margin. It does not follow, simply because slavery increased output, that it was essential to that output. Not only did the total losses borne by slaves far exceed the market value of the increased output, but also, for each slave working in the cotton fields, there were hundreds of American, English, and continental users of cotton cloth. Because there were so many consumers of slave-produced products, any fall in prices resulting from this marginal increase in output was widely distributed.  The fact that these individual gains were so small relative to their human cost much more forcefully underscores slavery’s barbarity.

About the Author

Jeffrey Rogers Hummel is Emeritus Professor of economics at San Jose State University and the author of Emancipating Slaves, Enslaving Free Men: A History of the American Civil War, the second edition of which was released in 2014.

Further Reading

Barzel, Yoram. “An Economic Analysis of Slavery.” Journal of Law and Economics 20 (Apr 1977), 87–110.

Conrad, Alfred H. and John R. Meyer. “The Economics of Slavery in the Ante Bellum South.” Journal of Political Economy 66 (Apr 1958), 95–122.

David, Paul, et. al., Reckoning with Slavery; A Critical Study in the Quantitative History of American Negro Slavery. New York: Oxford University Press, 1976.

Fenoaltea, Stefano. “The Slavery Debate: A Note From the Sidelines,” Explorations in Economic History 18 (Jul 1981), 304–8

Fogel, Robert William Without Consent or Contract: The Rise and Fall of American Slavery. New York: W. W. Norton, 1989.

Fogel, Robert William and Stanley L. Engerman. Time on the Cross: [v. 1],The Economics of American Negro Slavery and [v. 2] Evidence and Methods. Boston: Little, Brown, 1974.

Gutman, Herbert G. Slavery and the Numbers Game: A Critique of “Time on the Cross” Urbana: University of Illinois Press, 1975.

Hummel, Jeffrey Rogers. Emancipating Slaves, Enslaving Free Men: A History of the American Civil War. Chicago: Open Court, 1996.

Hummel, Jeffrey Rogers. Deadweight Loss and the American Civil War: The Political Economy of Slavery, Secession, and Emancipation (2012), a draft book manuscript available at SSRN

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