The little present that I've brought along that's still in the mail room is just a copy of the quarterly journal of Austrian Economics. I'm one of the editors of this journal.
It's something that I highly recommend because I know that many of you have looked through professional academic journals and what you'll very often find is a great deal of mathematics and formulas
and things that may not be really relevant to applied economics, the type of things that you might be doing on the job or things that might benefit you on the job and this is a journal that we hope and strive to make very readable and very helpful either directly in applying economic analysis or in building your ability to formulate problems and to understand the background methodology of what
The Austrian economist view as economics, and I am obviously from the Austrian school of economists, and at the Ludwig von Mises Institute, we're kind of like the Shiite Austrian economists in contrast to the Sunni sort of soft core, wishy-washy type of Austrians.
Now, with that said, however, I have to say that this talk is based on a paper which has
been distributed apparently over the web to you that is much more in line with mainstream
applications, methodology and content.
The paper itself, Voting for Victory, An Analysis of Confederate Government Trade Regulations
and Legislation, that sounds pretty darn unimportant 150 years later about a failed government.
What I'm going to argue and show you is that it provides a lot of valuable lessons.
So in the course of this evening I hope that you will see basically how we have carried
out this research agenda, not just in this paper but in a series of papers and most recently
a book on the subject about the role of economics in the American Civil War.
And I think you'll also find that we're going to be providing some key insights into the
actual outcome of America's greatest and most tragic and most liberating event in American
and History.
And it's not just historical, but I think that what you'll find is that these insights
are just as applicable today in terms of improving our understanding of things like war, things
like trade policy, and things like how politics actually works.
So I'm going to begin by giving you sort of an overview of our research agenda.
What we started with and what we've come to in this, probably the last paper in the series.
It started out as a one-line footnote in my dissertation, literally one line, and my dissertation
director said, what is this?
I said it's a footnote, you can't have a footnote that's just one line long.
But there it was, and basically what it was, was a note saying that the running drugs into
the country illegally is very similar to what the blockade runners were doing during the
Civil War.
They were running goods into the country against a very formidable police force.
So we started with that.
And that one footnote has become a long, drawn out, but I think insightful research agenda.
The first paper in the series, we're basically taking very simple economic tools here.
I think you can do a lot of good research, publishable research, with basic economics
that you could very easily find in your Principles of Economics course.
In this paper, what we are playing off is what's called the Elchin and Allen effect.
And has anybody heard of the Elchin and Allen effect in here?
Okay, a couple people.
It's just basically relative prices.
And Elchin and Allen described a problem in the state of Washington
where the people in Washington were complaining that all the good apples were being shipped out.
And Elchin and Allen explained that the cost of the truck of shipping those apples
from the state of Washington to Arkansas is the same.
The truck driver doesn't care whether the apples are really good apples or really poor apples and so as a consequence of that fixed cost of shipping the apples out, the apple shippers would end up shipping out the highest quality apples and leaving the rotten, spoiled, gnarly apples for the people of Washington.
So, the same thing happens with drugs. When drug dealers think about running drugs into
the country, from Colombia, let's say, and they realize that they're facing the same
amount of risk, whether they run in marijuana with potency of 2% or marijuana with potency
of 5%. So, what they end up doing is, based on their incentives, with that fixed cost
of Money, The Theory of Money and Credit of Money and Credit of Money and Credit of Money
and Alan Effect, we call it the Rhett-Butler Effect because Butler was the famous character
in Gone with the Wind who was a blockade runner. And what we found was we looked at the number
of ships running in through the blockade, we looked at the number that were being captured,
which is akin to the number of drug dealers being captured, and then we looked at the
price of high quality goods versus low quality goods. And what we found was that every time
The union forces of the North were successful in capturing the blockade runners that the
price of luxury goods would actually fall because the blockade runners would go more
and more towards the high-quality, high-priced luxury goods.
So it's a very simple relative price effect.
If you put a fixed cost on doing something like transporting a good, you'll end up encouraging
The Higher Potency, Higher Quality Good.
The second paper was actually published in the Quarterly Journal of Austrian Economics.
In this case we looked at what could the Confederate government have done to improve the odds of
block-haters running into the South and bringing goods, much needed goods in and cotton out
of the Country.
Well, what we found is they didn't do anything positive and that they actually ended up enacting
a lot of negative policies on these blockade runners and made it actually more difficult
to run the blockade.
So in the first paper we emphasized just the basic price effect of running the blockade
and capturing the ships.
In the second paper, we looked at Confederate policy, and we began to realize that instead of just really a minor issue,
something that's more related to the movie Gone with the Wind than to anything of modern policy relevance,
And what we came to see was that this battle at sea was really the key to the outcome of America's Civil War.
You may know, you may not know, but North and South were fairly evenly matched.
Their generals went to the same war college. They had the same guns. They had the same bullets.
People.
But it's a lot easier to defend a position than to attack a position.
And the Union was attacking while the South only had to defend itself.
You may recall at Gettysburg when General Lee sent General Pickett with 10,000 men on
Pickett's charge up a hill.
Lee used all of his cannons and shot the cannons at the Union lines until the cannons were
You could expect to be a draw, and the land war was a draw.
The Union would win a battle, the Confederacy would win a battle.
The next one would be a draw, and it would go on like that.
Okay?
Now, if you have a war like that, eventually, if the Union can invade successfully and overthrow
the Confederate government, then the Confederate government wins the war.
But they didn't, obviously.
We argue that the blockade was a leaky affair, if not for Confederate policy.
It's kind of interesting to note that in this battle at sea, this most important battle,
on the Confederate side, the people running the blockade, they didn't have uniforms, they
They didn't have guns. They never shot at the Union ships. And the Union blockade fleet
that was trying to stop these blockade runners in this most important aspect of the war,
they didn't shoot at the Confederates either. They didn't shoot at the Confederates because
the Union blockade fleet was paid on the basis of how many ships they captured. So if you
You guys had a union boat out there and you captured a Confederate ship with valuable
cotton, let's say.
You could take it to port and sell it and get to keep all the money.
So they never shot at the Confederates because they didn't want to damage the ship and damage
the commodities that were on board.
So what were the Confederates' mistakes?
Well, they started the war with a policy of King Cotton, which said that cotton was king,
We're not going to sell any to the rest of the world, and we're going to make England
and France intervene on our behalf.
We're going to make them send their large navies to the Confederacy and blow up the
Union ships.
Of course, that didn't work.
Then they came up with a brilliant idea of impressing naval ships in the South.
So if you had a large cargo ship, let's say, in the South, the Confederate government impressed
at the University of New York, The University of New York, The University of New York, The
The American South at this time was an economy based more on its own comparative advantage
in cotton production than any other economy in the world and probably the history of the
world.
And then later in the war they enacted trade regulations.
They said that this blockade business is out of control and that we need to regulate it.
So they prohibited luxury goods from being imported.
They put price controls on imported goods, and they required that all ships coming and
going leave half of their cargo space for the Confederate government.
And you might think at first that some of those things don't sound too bad, like prohibiting
luxury goods.
Why do we need to import jewelry and perfume and brandy and things like that, dresses,
when we're at war and we're losing the war?
Well, it turns out that luxury goods were imported by the crew, that each crew got to
carry a knapsack of stuff into the country.
And so the blockade runners had an incentive to run because they were carrying a bag full
The next paper we looked more specifically at, did the regulations have to do with the
In this paper is called The Unintended Consequences of Confederate Trade Legislation, so the ultimate
And the answer is going to be it hurt the war effort, that it even hurt the government's
ability to get food for its troops and ammunition for the army.
And of course it's very difficult to decipher these kind of things empirically.
You've got a war going on, you've got hyperinflation going on.
So the numbers that exist from this period are very difficult to decipher.
There was a currency revaluation at the exact same time, so that while all this is going
on, the Confederate government said, if you bring in $3 of Confederate currency, we'll
give you $2 of the new currency.
If you don't bring in the old currency, it's not going to be worth anything after a certain
Period Time. So there's a lot of chaos going on in the world of this economy, this historical
economy, but what we did was we divided up the goods for which we had price data into
the category of goods that were wholly imported into the South, goods that were wholly domestically
produced in the South, and goods that were both produced domestically and imported. And
So we're using very basic techniques, again, to look at this question.
And what we found was that imports, the goods that were imported, rose dramatically after
this legislation went into effect.
So things like, basic things that the Confederate war effort and the Confederate economy needed
like beef, flour and salt, basic necessities dried up and the price of domestically produced
goods like cotton actually went down because it couldn't get out into the European markets.
So what we do find when we apply some econometric techniques to this issue is that this legislation
caused a distinct harm to the southern economy and this is occurring almost simultaneously
with the disintegration of the Confederate Army and the disappearance of the Confederate
government.
I mean, the army is being dispersed, the Confederate government is on the run, Jefferson Davis
is wearing a dress and trying to escape Richmond, basically, as a result of this legislation.
So it doesn't seem to make much sense that they use this legislation.
And so we're getting a little closer to this particular paper, but when we published this
book, the academic journal Public Choice, which looks at issues of why particular pieces
of legislation are enacted, they reviewed it and reviewed it very favorably, but at
But at the end they said they never did explain why the Confederate government would make
all of these bonehead policy moves that undermine their own efforts.
So hence this paper.
Why did they vote for policies that would have unintended consequences if they were
known to be obviously destructive.
So here we have Voting for Victory, an analysis of the Confederate trade legislation.
Things were not going good for the Confederacy in mid-1863.
The Union won at Gettysburg, Vicksburg and Chattanooga so that the Confederate Army in
Pennsylvania was badly defeated, the city of Vicksburg in Mississippi was captured, opening
up the Mississippi, cutting off Texas and the other western states, and Chattanooga,
you know where Chattanooga is, it's in central south Tennessee on the road I-75 headed towards
and the Heartbed of the Southern Economy.
So things were looking very poorly and the Confederate government started enacting a
lot of legislation like this trade legislation, including lots of taxes.
The act itself was called an act to prohibit luxury goods or articles not necessary or
of common use.
and it consisted of, as I said, prohibitions against luxuries, price controls on imports
and impressments of ship or cargo space. Political scientists are also been paying recent attention
to this issue. As a matter of fact, I just received a working paper, Yale University
report on the question of why did the Confederates wait so long to enact taxes to support the
War Effort, and why do they use inflation for so long? Basically, one of the differences
that you find between economists, most economists, and political scientists, or most political
scientists, is that political scientists try to explain things almost, not exclusively,
but usually by ideology. What's the politician's ideology? Are they liberal or conservative?
Are they Republican or Democrat?
Economists look for economic interests.
Who's going to benefit?
How much is this going to cost?
Who's going to have to pay for this piece of legislation?
Of course, neither side denies, economists don't deny that ideology exists and political
Scientists don't deny that economic interests don't exist. It's just where the emphasis lays.
So, again, what we find is that very often the best technique is often the simplest. And so we
We looked at how these legislators voted.
In December 24th, 1863, the bill was introduced and read.
December 30th, it came up but was postponed.
January 21st, it came up in 1864 and it was postponed.
January 28th, an amendment to the bill was offered in Congress.
And this amendment, it's a little confusing in the paper, but this amendment basically
would allow the president of the Confederacy to weaken this legislation.
So that instead of requiring all ships have to give exactly 50% to the Confederate government,
this legislation would allow the president to reduce that percentage to say 30%.
The amendment failed, 24 to 42. Next, a move to reconsider this bill, in other words, to
take another vote or another look at it, came up, but it failed again, 27 to 37, voting
against the movement to reconsider. Then finally, on that day, a final vote was taken and it
passed unamended in its original form 61 to 11. Virtually all the people who voted against
it had voted for the amendment and voted for the motion to reconsider. Now we had a problem
with the amount of data that's involved in this. So what we wanted to do is to look at
all three votes as counting towards a particular representative's view of things.
So we made an index so that if you voted against the amendment, a representative would be given
a value of plus one.
If you voted against reconsidering the amendment, you were given another plus one, and if you
When you voted for the trade regulation itself, you were given a plus one.
And so through this method, you could have a legislator who was ranked zero, who was
completely for free trade, or you could have a representative ranked three, who was completely
against free trade.
Or you could have something in between, somebody who was marginally pro-trade or marginally
Against Trade.
Now we ran several models, as you saw on the paper, first running the models without ideological
or political variables and then running them with ideological and political variables.
We started out by testing each of the separate votes on the legislation and then we used the
combined vote of the index 0 through 3.
We compared their voting records to who they were, what were their characteristics, and
the types of variables we used were, we had three political variables, which was how they
Whether they stood on secession, whether they wanted to leave the Union or not in the first
place, what was their political party prior to the war, Democrat or Whig, and whether
or not they were a lame duck in Congress.
We included eight occupational categories, if they were a farmer or a lawyer or a banker.
We included two variables about representatives' slave holdings.
How many did they have and how significant those holdings were.
Three variables about their personal wealth, a slave index of the congressional county
that they were from, the county income, and four invasion variables, whether or not the
congressman district was occupied by the union forces or whether or not the congressman district
was behind enemy lines, so to speak.
So we basically have a very good picture of who these people were, what their occupation
was, how much money they had, what their county was like, was it a slave holding county or
was it a free county, and whether or not it was behind enemy lines.
We argue in the paper that whether or not a district was invaded is the key and deciding
factor.
You're always going to have some people who are for free trade and benefit from free trade
and you're always going to have people who are against trade and pro-protectionist.
But the one thing that changes through the war is not really their ideology, is not really
their county, is not really their personal standing or their profession, but whether
or not their district was invaded and occupied by the Union.
Now why would this matter?
Well, in the case of trade legislation, we argue that it's placing costs on people who
live in the South during the war.
If you put prohibitions, if you put price indexes, if you put taxes on the economy,
what's that going to do?
It's going to raise the price of food to you.
It's going to raise the price of clothing to you.
It's going to raise the price of medicine to you.
Unions are going to go up. You're going to inflict pain on people. You're going to make
it not impossible but very difficult to export those products that they make. But if you're
behind enemy lines, if you're in union control, that policy isn't going to hurt you at all.
Those taxes, those prohibitions, those price controls essentially don't matter in those
That's very boring. That's also not my specialty. I'm not an econometrician. So if you have
any really hard questions, especially if it involves really hard words, I'm probably not
going to be able to answer them. But I will take any difficult questions on econometrics
back to my econometrician. And if he thinks it's a good question, I'll see if I can get
And the best question, I'll even give you a copy of my book, but what did we find?
Well basically that invasion of your district made it always much more likely, statistically
significant, that you were going to vote for restrictions on trade.
So if your constituents were beyond Confederate held territory, you would vote for those
draconian trade restrictions and that's really the only variable that comes out consistently
across all these models.
Leave Owners tended to vote in the same way.
Now one of the interesting things that's going on here is as the Union is invading, it's
in a sense liberating the slaves.
And you can liberate slaves, it's really hard to liberate land, things like land, because
That's fixed. But slaves can run away. Slaves can be captured by Union troops and freed
into the North. And so the slave owners are going to be pushing for any measure that might
help preserve their slave ownership. Non-slave districts, not surprisingly, also had some
some evidence that they wanted to weaken these regulations.
So when we get weak evidence that places urban areas, seaports, congressmen from those districts
with the intent not to be fewer slaves and more international trade, people who worked
in finance, people who worked in banking, that occupation actually came up with some
The Theory of Money and Credit
The Yale University study that I mentioned found it entirely different.
They didn't look at this piece of legislation, they looked at taxes and they found that ideological
variables did matter, sort of, and that capture variables like invasion variables did not
matter.
They kind of found the exact opposite, but not really. They measured things differently, and they also use slave ownership as an ideological variable.
Well, we're using it as an economic variable. So in many respects, I think that they kind of changed the data from its original form.
and actually we're taking data that was given by other political scientists
and they changed the data in the mean of some of the variables to come up with
ideological results.
So why did the Confederate Congress
vote for these unintended consequences
that actively contributed to the fall of the Confederate government?
The answer is that occupied districts
could vote for
the legislation without having to pay any of the cost, okay, so you've lost your district,
your congressman represented a district that's been lost, it's not going to cost your district
anything, but it might conceivably get it back for you, you might conceivably have some
chance of the Confederacy winning.
So basically, we view the Confederate loss and the Union victory on the part of the South
as a flawed democracy, that basically this ability to vote for benefits and costs of
districts that are no longer under control of your government is a weakness in the political
System, which ultimately contributed to the fall of the Confederacy.
Our research process and program has examined many of the aspects of this key issue of the
American Civil War.
We identify a main problem, which is the blockade.
We identify a main effect, which is the Rhett-Butler Effect or the Relative Price Effect.
We look at the effectiveness of the blockade and find that it's a policy-driven result
on the part of the Confederate government.
We look at specific analysis such as the unintended consequences of the trade legislation, and
we find the source of the problem, which is the congressional voting, which essentially
led to big government solutions and in this case prohibitions, price controls and impressments.
And this is in line with a more general theme where the Confederate loss was a result of
a big government approach to the war and a big government approach that became more draconian
as the war proceeded and that this evidence that we're providing is evidence for what's
called now in the history profession the libertarian view of the Civil War and it's interesting
And to note that this libertarian view of the Civil War has been attributed to a fellow
that I work for, I work with Joe Stromberg at the Mises Institute and one of your colleagues
at San Jose State University, Jeffrey Hummel, those are the two leading proponents, I guess,
of this libertarian view that the South, the Confederate loss was attributed to the fact
As I said, this gives us some information about war in general, strategy, and the fact
that economics matters most when fighting a war.
Basically, almost any country can defeat any other country if it uses its resources effectively.
So you can have a very small country defeat a world power.
Afghanistan defeated the Soviet Union, Vietnam defeated the United States, the United States
Defeated Great Britain, the world's largest power at the time.
Trade Policy, the lesson here I think is important and transparent hopefully, but it is that
government direction of trade is not the way to go.
And finally, in politics, political solutions, I think that the lesson to be learned is that
central control is almost always harmful to the goal that you're seeking.
And with that, I'll open up for questions.
You mentioned the three different votes. I didn't catch the dates, and the reason why I'm asking is it's conceivable, since you're saying that there was a voter that captured the country, that last vote made a big swing in the number of people that voted for it.
Was there a big push, showman's march to the sea, or something where a large segment of the South was lost, and that would have influenced the people that were in the position to vote, to vote the way you're saying they voted?
Yes, Sherman was marching on Atlanta, not to the sea at that point. There is a big swing
in the vote. You look at the amendment and it's 2442. You look at the move to reconsider
The end vote is for the legislation itself, whether to pass it or not, it's an all-or-nothing
type of proposition. So you get a lot of funny results in all-or-nothing propositions. And
you do so today in Congress. I mean, that's what I said is that what you see in this process,
you can see today in Congress where a particular party, a particular group, a block of senators
will offer amendments. They'll even offer amendments that they really hate just to try
How to Kill the Bill
Okay, so let's say there's a proposal to increase the minimum wage to $7 an hour and we go in
there and make a proposal to amend it to $17 an hour.
Well, if it got to $17 an hour, we wouldn't be for it, but even Ben wouldn't be for it.
So you can rig the system, that's what's going on.
You can rig the system and that's what they're doing in those first two votes.
But then it comes to the all or nothing choice and almost everybody votes for it except those
eleven hardcore pro-free trade people who had been, I mean they got a score of zero
because they voted the right way all three times.
And you know, you see this in Congress today, you'll be fighting a piece of legislation
And when it comes up for final vote, you'll think, oh, well, you know, I'll vote for
the budget, you know, just so I can say I was on the winning side, or I'd marginally
support that rather than another possible alternative.
So congressional voting, you know, we're pretty sure that it's almost always based on economic
interests or self-interested motivations, but it's a messy process.
Yes?
I'm most interested in voting, especially the fourth vote. You alluded to in a footnote.
The next year they re-voted again and they reversed themselves. So, what happened there and why did you conclude that date in there?
Geez, oh, I've forgotten all about that part. Okay, let's see.
Yes, what happened, what happened in, they reversed it because they were feeling the negative
of Effects, and so there was a combination of the fact that, obviously some congressmen
don't understand economics, landmark point that I made there, they might not understand
their own interest or their own district's interest that well, but once the legislation
is in effect, then all of the costs start to come home and so they acted to overturn
it, but what was it that the president vetoed that, right?
They voted again, but they failed to override.
They failed to override.
Now the reason we didn't do anything with that was not that we left any cards on the
table.
It was because by that time they had already sent the transcriber out with a gun to help
defend Richmond and they were going mostly in secret sessions.
The Confederate Senate almost always met in secret sessions and then they would come up
with the legislation and quickly hand it over to the House to see what their point of view
was.
I wanted to vote it into, because they didn't want a lot of this stuff leaking out about
budgets or call-ups of troops, and so eventually almost everything went into secret sessions
and they would not record a lot of the votes, so we're actually kind of surprised that so
So much of the data is available, so much of the information is available.
The Confederates were really good bureaucrats.
They kept a lot of detailed information, even though they were running out of paper.
But they kept a lot of detailed information.
As a matter of fact, you've heard of the phrase red tape.
Ted Tate actually comes from the Civil War and the Confederate quartermaster, General
something like Irwin Myers, was in charge of requisitioning commodities and equipment
and stuff to the Confederate armies.
And if everything wasn't exactly correct, he would put a piece of high-cost European
red tape on that requisition and that meant it stopped until whoever requested it came
in and started looking for it and filled out the forms correctly.
So the Confederate government, you know, they have this free market, small government, limited
Government Reputation, but they were all, many of them were big government
bureaucrats. Yes, someone who knows trade restrictions for the economy, and I thought that a lot of the southern
I don't think that Congress people would have felt that way or understood those kinds of things because they were always the ones voting against the high tariffs from the Northeast.
Voting for such legislation as this would be voting against victory. Yet you characterize all the Congressmen who vote for the trade legislation as being sincerely pro-victory.
But they were thinking, this is very short-sighted thinking, and they were thinking, you know,
if we can just get those guys running those ships, maybe these ships don't even know
about it, maybe they'll just run in here, violate the regulations and we'll just take
all their property, which is what they would do if you violated the regulations.
If you got caught with any luxury goods, they took your whole boat and everything in it.
So it may have been just a, I don't have any specific information on this, but it may have
been just an effort to steal the stuff that was coming in.
Yes?
I was under the impression that in the Confederate Congress, they didn't actually have a two-party
system.
So I was kind of confused as to how the political scientists are going over or against alluding
to party bonds against the Mexican nation.
That's an excellent point.
In the Confederate Legislature, it was a one-party legislature.
They didn't call themselves Whigs or even Democrats because they were fighting the Whigs
and the former Whigs and the Democrats up north.
And so they basically dropped party labels in the Confederate Congress and they also,
at least on the surface did not organize committees on that basis, but that didn't stop the political
scientists from going back and finding out what party they belonged to before the war
because almost all of these people were politicians prior to the war or were active in politics
in some form or another. So we know what they were before the war. And so they could actually
go back and reconstruct that sort of thing. Lydia?
The Theory of Money and Credit
I'm surprised that the occupations didn't have some correlation with voting. Do you have an explanation for that?
So, we don't normally expect occupation to have much of an effect in the U.S. Congress,
for example, primarily because they're all lawyers, but actually back in this time there
were a good number of lawyers, but there was a fair representation from 8 different professions.
We did see a little bit of evidence that, for example, the finance and banking people were
opposed to the trade restrictions because, of course, trade requires financing and that
sort of thing, and finance people have to have some economic knowledge, so they wouldn't
be fooled and they might be hurt significantly as a result.
As the models changed and brought in more variables, a lot of that would disappear.
You clearly got the sense that certain professions were lined up in a certain direction or another,
But that other variables were stronger, and so slave holding definitely had an impact
which would tie that to farmers, but frankly the results, the econometric results in this
in this area are weak and you see the numbers dancing around between land value farmers
as an occupation, slave holding, slave holding the counties, it's just unstable and I think
that's one of the reasons why the professions get wiped out.
I wonder if there's any relation to how long legislators, I mean the tendency might be
Oh yeah, and this is going on to a very significant degree in the Confederate House.
You have members of the House who are powerful members of the U.S. Congress and they're powerful
of Money, The Theory of Money and State, The Theory of Money and State, The Theory of Money
You mentioned for a Confederate congressman, winning the war was essential. Is there any
relationship between the Bush administration and how they won the vote just this recent
election? Do you see any relationship between these two?
I'd like to. In the case of the Confederate Congress, if they lose the war, they're out
of a job. There's no way, I mean, they'll obviously lose their Confederate House seat
and it's unlikely that their constituents are going to be that pumped up about electing
Any of the ones that were, for example, involved in the original secession, and now with respect
to President Bush, now of course he is now a lame duck president.
With respect to the war in Iraq, there's a little bit of similarity in the sense that
if he wins a war, a president goes down in history as being a great president.
And the more people you kill, the greater the war, the greater you are as a president.
If you lose the war, if Bush loses Iraq, if it gets nasty, and the next guy has to come
in and pull American troops out in bitter defeat, then Bush will go down as a very bad
president.
The only example I can think of is President Johnson, who ramped up the Vietnam War, killed
I was wondering what the voter preference of the confederate had to play in this decision-making process and also the manufacturers of the goods that are being restricted?
Well, voter preferences are very weakly introduced into the model by looking at a few variables
that relate to the congressman's districts.
Whether or not the district was wealthy or poor, whether it was a slave-holding district
or few slaves in the district, those sorts of variables.
The manufacturing in the South during the war was a mess.
Before the war, you could characterize it very easily as manufacturing in the South
was limited and it was most directed at industries that centered around cotton, tobacco, those
sorts of things.
So the processing industries.
So before the war, it's very easy to identify those interests.
During the war, it's very, very difficult because everybody was getting government contracts
I'm sure what your view of an Austrian is regarding account metrics in general and specifically
the ability to work like you've done.
Do you feel like you need a shower?
Well, you know, as an Austrian, I'm not going to say I'm not going to say I'm not going
to say I'm not going to say I'm not going to say I'm not going to say I'm not going
Well, you know, as an Austrian and a member of the Shiite school of the Austrians, the Austrians are against the use of econometrics as a methodological tool.
To do economics.
To find history, right?
No. No. No, they don't even like it as history.
but they view it as history but they don't think it's good history and you
know there's a lot of problems with econometrics besides methodological ones
however you know so in the Austrian School an econometric test doesn't prove
anything it doesn't disprove anything the absence of econometric evidence
doesn't just prove or prove anything in terms of economic theory or the understanding of
economic policy, but it does create for me a plausible empirical story that when you're
You're trying to communicate ideas with economists and you're like a very small percentage of
the economics profession and the economics profession itself is much, much larger and
focuses, pays a lot of attention to econometric analysis, then, you know, if you want to be
In dialogue, then you occasionally do some kind of metrics, and I don't like that, but
it's fun to work with other people too, so, yes, Ben?
Let me push you on defending your own paper, maybe it'll make me a student or a CA, or
even a current, I don't know.
So, it's the story that you're telling, you're not doing what Mises is calling theory, you're
So it seems like econometrics is one of many tools used to do history, and some parts of
history are better suited for econometrics, others are better suited for ethnographic
type things, and econometrics is as methodologically sound as the other type.
So instead of just saying your papers communicate to the other economists, I mean, I think it
I don't know if it's the best technique.
It's the best technique that I know of to deal with all of these numbers simultaneously.
I actually took the entire data set and of all the congressmen, all the individual congressmen
and all of the characteristics and all of the votes and started putting it down on paper.
And this took a long time, but I like eyeballing the data, and I ended up with a sheet of paper
that was like that, it was all taped together.
And the results that I sort of deciphered from just looking at the numbers was very
similar to some of the results that we got with our models.
But it is, that was a very complicated task. I don't actually think that the econometrics
that we have right now with the data that is involved in this study, I think the results
are still very unclear. But they were clear enough on the ones that we were concerned
about which is the invasion variables that we went forward with basically. So, you know,
There is no other technique that deals with numbers systematically at this level, and
...
You could have put it on a map, please.
Done that.
That would have been a really cool start.
Yeah, it gets really complicated though, but I've done that, put them on maps, economic
geography maps behind them, the whole nine yards.
Yes?
Since you watched their votes, a lot of them were in the Congress of the United States when they seceded.
Now, there was an agricultural area and their vote would have hinged, whether they were conservative or liberal, on their background.
When they switched and went to the South as a separate country, did their voting attitude or the way they voted, is there any correlation to how they changed it?
I can very easily see them voting one way here and voting the other way when they were a separate country.
They were voting for less agricultural taxes when they went home. They voted for big taxes.
Actually, we did not study that particular issue, but that issue has been studied.
What they have found is that there's pretty good cohesion between what you were before the war
and what you did after the war. That is, if you accept econometric results. Just kidding.
Yes, Ben. All right, so I'll ask you a non-econometric question. Okay. Actually,
more of a geography support question. Okay. And the way you break up the day is you use
Union controlled districts and districts that aren't contiguous with the rest of the Confederacy
should be counted like the rest of the Confederacy since they're on the ocean and there aren't really these effects?
Or were there no ports in Texas or New Orleans, the last big port? I don't know that.
Tell me why they can be counted as a program.
Well, you basically have the Mississippi River being controlled by the Union.
You have Union gunboats and Union Army, and the Union Army is going out there and capturing
the most fertile, cotton-growing area in the world.
But that makes it very difficult to cross from West to East Confederacy.
They did it.
They actually, there was trade from west to east, but government communication was highly
disrupted.
It was very difficult to move armies, equipment, and bureaucratic type stuff from one part
to another.
So, for example, when they had the Monetary Revaluation Act, that went into effect at
at a date certain in the East, and then I think three months later in the West.
So there was that much of a delay in getting from East to West.
And that was just basically moving the paper, you know, a few boxes of paper money over
and getting the Western banks to exchange.
The western government of the Confederacy was at this time basically in disarray and most
of the customs officials and that sort of thing had been moved out of Texas because
Galveston was, Galveston Island had actually been taken and the port had even before that
had been effectively blockaded and the port at Metamortis down by the Mexican border was
also effectively completely blockaded.
So there wasn't really much except small craft blockade running out of the western confederacy.
Now they enacted the legislation but towards the end of the war the western army of the
confederacy actually attacked Galveston.
They stole some boats and some cotton up the river in Houston and they strapped the cotton
onto these rafts and went to Galveston and because they had these huge cotton bales all
around the boats, the Union cannon fire didn't hurt them.
And so they successfully invaded Galveston and took it back over again.
And they destroyed enough ships, I think, so that the blockade was actually open for
a little bit.
But that was after the legislation.
So we added it all up and we basically said, you know, this legislation really didn't affect
the western part of the Confederacy.
Arkansas completely out of Confederate hands.
Louisiana completely in Union hands, completely in Union hands, so that we didn't really see
any way that they could have an effect, that any effect would be coming from the Union economy,
not the Confederate legislation.
Like the Western states were basically self-sufficient?
Self-sufficient, yeah, pretty much, pretty much.
Yeah, you said that, you know, essentially you concluded that the blockade, you know,
caused some bad policy on the part of the Confederacy, which caused them to lose the
war.
Yeah.
Couldn't you make, like, a similar argument for a lot of other cases that caused them
to lose the war?
I mean, for example, like, the lack of Europeans' intervention.
Mm-hmm.
I mean, would that be a...
I mean, how do you think that plays into it?
I mean, was that a reasonable thing for them to assume might happen?
Did it work out that way, or is it...
Well...
Well, that is, you're absolutely right, I mean, there are a thousand and one reasons
why the Confederacy lost, and if any one of those had gone the other way, they might have
won.
And I'm not really, of course, looking at this issue because we're going to try to restart
the Civil War or something like that. I mean, we're not trying to replay it here, but your
point is absolutely valid. Historians now think that the King Cotton policy of waiting
for European intervention was wrong-headed and probably more of a story than their actual
and Social Strategy.
But like you say, you could dismiss a thousand things and you'd still have a number of things
left over that were important, battles that could have been won, messages that could have
been lost or not lost, soldiers or generals who were killed because a cannonball ripped
off their big toe and they bled to death, there's so many of those things.
But I guess it's just the economist instinct when you have, when you wash out all these
things north and south and you have these more or less identical and balanced military
forces and economies and then you have this one separate issue where they both differ
so which is the blockade and the blockade running and trade is so vital to the Confederate
Cause. That's why our noses are sniffing and snooping in that direction. Yes.
In 1923, you had the Gettysburg, which was basically an unlawful division for the war of slavery.
But by enacting the blockades, the South pretty much cornered themselves and isolated themselves because they weren't trading.
And as part of that, you can't say, well, yeah, they say it's about slavery. This is about trading.
We're trying to trade with you. We're here in Europe. We're trying to get money.
Money, you know, and they're blockading us, you know, we're trying to reach out to them
on the scene.
So I think that, Ryan, I think that was his commission, they pretty much build their own
thing.
Yeah, well we argue in the book that the secession and the war itself were about international
trade and tariff policy and all that kind of stuff, with the South wanting free trade
and the North Wanting Protectionism and High Tariffs.
It is perplexing.
Why would a free trade group enact all of this stupid policy?
Believe me, that's just the beginning of the stupid policies that they enacted.
That's why I think you need extraordinary reasons for those types of maneuvers.
You can't just say, oh, they kind of got tired of things, or they got desperate, or their
ideology shifted, that kind of thing.
It's got to be something big.
Lydia.
There's a little bit, and I don't know if I hit you very well, kind of an egg thing
I'm not quite sure about, because there are benefits to trade and having that trade come
through and carrying whatever they're going to carry, those benefits accrue to them to
the extent that they can keep the resources that come on those ships in the South and
use them for the purposes of the South.
You're arguing that to the extent that people who are overtaken by the unions don't carry
or because all those resources, if they can be commandeered by the Union soldiers, we don't want them to come in, right?
That trade is not benefiting the South. If it gets misdirected, if it gets, you know, who has the money to buy the stuff that's coming off the boat to some extent?
It's now going to be the people that are so much closer to you in the North.
and so blocking trade might not be the signal that they put their foot in the grave and ended the war, but the fact that the war was ending and they had lost control of the resources that were coming in, so why let them go to the union?
I don't know if there's any counter-evidence in terms of...
So the 11 people who press reporting it,
what kind of system do they have to control the trade that's coming in?
If they could keep those resources in their hands,
then I could see why they still want to support the over trade.
Yeah, the Confederates had lost trade and the control over trade
in the sense that their other major ports
The Confederates, they were all effectively closed down by the Union except one and both
the Union and the Confederates stopped even monitoring the minor ports.
So the minor ports were costing the Confederates more to monitor than they were taking in revenues.
So they just gave those customs guys a rifle and said, you know, go, you're in unit X.
And so there were all these minor ports that were unmonitored by both sides and the major
ones were all shut off except one, Port Fisher in North Carolina so that by and large the
The business was all going from the Bahamas and Bermuda to Wilmington to Richmond to the
Army of Northern Virginia. Probably 50% of all trade was going in that direction and the
biggest other chunk was crossing where? Between the North and the South. The Confederates
In the Union, governments were the two biggest traders between themselves in the war. The
Confederates were trading a pound of cotton for a pound of beef. Kind of interesting because
the North needed cotton just as much as the South needed meat because they needed clothes.
You can't grow, I'm from the north and you can't grow cotton up there, I can tell you
that.
Alright, well thank you.