Okay, as I said in the first class, we're starting
the section of lectures on colonialism.
The beginnings, the origins of the United States, and
while it may seem distant in time,
what we're going to find out is that that initial imprint
that the old world made onto the new world
is really vital. It still has lingering effects
to this very day.
And so the first full lecture here
in this class,
we're going to start right at the beginning
with exploration.
The finding,
the founding,
the discovery
of the new world.
And we want to answer the first question, why did people move
from the old world to the new world?
Obviously the first step of that is exploration
and discovery.
now the economist has a simple answer
why did people move from the old world to the new world
and that is that the benefits
outweighed the cost
okay so that's just a very
very sketchy
beginning point
and we could well imagine that
places that are discovered
are not subsequently colonized. So discovery can actually be
haphazard or random or just for the fun of it
and not actually result in colonization.
But why are we here?
Well, if we look at this
notion
of Benefits Being Greater Than Costs
we really have to
we can step back just a minute
and look at where
we came from the old world
you really have to wonder why they would bother
to even come here
in the first place other than just for the heck of it
first of all there's the transactions cost
the cost involved
in getting from the old world to the new world
a very
very expensive
process not many people owned a boat
that could get from point A to point B
and of course
the passage even after
the new world was discovered
and settled
the passage of a european for example coming
to the united states might be equal to
several years of their labor.
So it's
a very expensive transaction to get from point A to point B.
And then there are all the risks
and uncertainties
involved in getting from the old world to the new world,
like being shipwrecked,
or being wiped out by disease or the native population.
And you know if you look at Europe at the time things were not really all that bad. It wasn't like they were running away from the worst spot on the globe.
It's not like people in Cuba wanting to get out of Cuba because of a declining standard of living and boy we're only 90 miles away from Miami.
It would be a sure need to get there, and I'd be willing to do everything to get there.
No, Europe was the place to be at the time.
A rising standard of living, growing prosperity in Europe.
The cultural signs sort of back that up.
A period of time, say the 16th century, where we have the likes of Shakespeare, Michelangelo and Da Vinci
And Europe was not particularly overcrowded.
If you look at Europe in the Middle Ages, Auburn, Opelika would qualify as one of the
world's largest cities.
So it wasn't like it was hugely overcrowded and there was no place left to put people.
That really wasn't the case on a massive scale.
So there was not a mad rush to the new world, quite the contrary.
However, there is this overriding resource explanation that we're going to be looking at.
And that is that in the old world, if we compare that to the new world,
What we find is that the old world was relatively labor rich.
There were a lot of people, a lot of laborers, a lot of artisans.
In the New World, there was a lot of land available.
So if we compare the Old World to the New World, the Old World had lots of labor relative
to land, and in the New World they had lots of land relative to labor.
So there's this, going to be this draw here, where labor can benefit itself and also capital.
The New World was capital poor, they didn't have a lot of tools, buildings, machinery,
Roads, things of that nature where the old world did. And so what we were going to see
over the first 300 years of American history, and this really continues today, is that labor
and capital flow from the old world to the new world in order to take advantage of the
relative scarcity differences.
Exploration. Exploration is going to be the main topic today and it's kind of interesting because we see all of a sudden a burst of energy in terms of exploring around the globe by the European powers.
The Portuguese were actually the first to go on a world scavenger hunt for new colonies, new land and new resources.
And the Portuguese started in the 15th century, they started moving down the western coast of Africa, setting up colonies and bases.
They are actually the ones that first moved around the Cape and into the Indian Ocean,
founding colonies in places like India and even China, Southeast Asia, and so they were
the first explorers and colonizers, followed by the Spanish and Christopher Columbus, who
who was Italian but flying under the Spanish flag, Cortez discovers America and 1517 conquers
Mexico within a very short period of time, Magellan discovers the Philippines under the
The Spanish Banner, De Soto discovered Florida, discovered the Mississippi River, and I think
actually was in the state of Alabama for a short period of time as well. Coronado discovered
of the Grand Canyon in 1540, and so the Spanish are actually here in the New World ahead of
many of the other European powers.
And of course the Spanish and the Portuguese basically, Spain in particular, are going to
have colonial territories from California to Kansas and down into Florida and then all
through Mexico and most of South America. South America also has colonies. The Portuguese
These have Brazil, the Dutch have some small colonies, things of that nature.
The British and the French and the Dutch are more late comers and they end up with colonies
in the United States and Canada.
Now what is driving these explorers?
What drove this spurt of exploration and discovery?
Well we could probably look at a lot of different types of explanations involving knowledge
accumulation, involving technology of shipping and that sort of thing.
But the overriding reason from an economic perspective is the economic philosophy of mercantilism.
Not really going to go through sort of a European history prelude to all this, but within Europe
In Europe at this time, the philosophy of mercantilism had become dominant and basically what you have here with mercantilism is kind of a symbiotic relationship or union between government and business
This is an idea of basically building the nation state.
So the goal here was not that economic policy or philosophy should be for the general well-being of society or for the average man.
The purpose of economic policy was to strengthen the state, to strengthen the nation militarily,
to be able to defend and enlarge your nation versus your competitors.
And the engine through which you did this was through a set of what's often considered
pro-business policies.
High up on this list was the idea that money is wealth. Especially gold. Got to get the
gold. That's the key to everything under the mercantilist banner. Now you've all taken
Principles of Economics
and one of the things that you've
forgotten
but I'm going to remind you
is that money is not wealth
we all feel like it is
the more money you have
the wealthier you feel
okay so if we can all imagine that someone made a mistake
and they added four zeros to your checking account balance
so that all of a sudden
for every dollar that you had you now really think you have thousands of dollars
and so
in that individual case money is wealth
but that's of course a fallacy
an economic fallacy in the sense that
Money for the individual may be viewed as wealth,
but money is really just the medium of exchange.
Wealth,
I mean it's basically just the
grease that makes the economic wheels turn in society.
Wealth is represented by things like homes, cars,
roads, buildings, warehouses,
factories, machinery,
farmland.
that's what is wealth in the sense that that is what can produce
consumer goods and make us better off. Money is just
the medium of exchange but this is one of the fallacies
under which they operated and on which they based
their economic policies.
Another fallacy
exports, good
Imports Bad
They thought that
it's much better
to work real hard, and that's one of the things that they wanted. They wanted
everybody working.
All farmland under production, nobody just laying around, sitting around doing
nothing.
you better be working
and what we want to do is work real real hard produce all these
sophisticated goods
and we want to send them to somebody else and not use them ourselves
and we don't want to import anything
from those other countries
And why would you want to do that? To make money, that's right. She's getting all the bonus points here in this class. To make money. So you've got more gold locally. Now, of course, you can't do much with gold outside of jewelry, but this is another
There are other aspects of mercantilism, including colonialism, that we'll be exploring, but I think that this is enough to get the flavor for what the European powers were up to at this particular point in time.
and enough of a motivating factor for their ventures of exploration, discovery and colonialism.
They basically wanted money.
Now the organization of these exploration ventures and discoveries and ultimately of colonialism
is based on the mercantilist model, where you have a public-private partnership, of course
they didn't call it, that's what we call it today, a public-private partnership, where
Where you have government in bed with big business, and this, it turns out, is a very
powerful tool.
It's a very powerful tool, many would argue it's too powerful, because these explorers
that you've all heard about
Columbus and Magellan
DeSoto and so on and so forth
these guys
of course they faced a lot of risks
but they had
the fact that they were privately motivated
they were motivated
by a for-profit venture
they were in it
for the Money.
Second of all, they had the government behind them.
They had government subsidies, in many cases,
and they were also given the rights
to, for example, declare that new discoveries were now the property of whoever sent them.
So whatever king or whatever nation sent them out on these voyages, they had the power to
put the flag down and declare all the land between this river and that river, as long
As long as it didn't belong to another European power, or as long as it didn't belong to
a Christian nation, they could declare it the property of whatever king sent them.
And of course, in addition to the subsidies, in addition to the backing of the government,
sometimes with government ships, government money, government soldiers, sailors, things
and other things of that nature.
Whatever you discovered, of course, the king would allow you to keep a portion of whatever
you discovered for yourself.
So it's a very powerful tool where you have this for-profit motivation, where you're going
to make a lot of money off of this stuff if you discover something, and you have the power
of the King Behind You.
So this is the mercantilist approach to exploration, it was very powerful, very successful in obtaining
new territories.
All of those we're going to see, it wasn't necessarily successful in terms of colonization
itself. Now the other two systems that I mentioned in the first class, Capitalism,
Socialism and Mercantilism, this is Mercantilism where you have both the
private sector and the public sector sort of working together with a very
powerful force. Now I'm going to look at the other two where you have private
Explorers, and Public Explorers.
In 1818, in 1909, there were a whole host of expeditions up into the Arctic to discover
to discover, to lay out the lands of the Arctic area, to discover a northwest passage around
the upper part of Canada to Asia, scientific expeditions to discover the North Pole, the
magnetic North Pole, things of that nature. So there were many reasons for exploring an
This was an area that wasn't intended for colonization really.
This was explored for commercial purposes, for fishing grounds, hunting grounds, transportation routes, and for scientific purposes.
So you have a variety of reasons why people were exploring that particular area.
That's for a nice sort of laboratory experiment. It's not very often in economics where we
can isolate enough factors to really explore something empirically in an isolated area.
But this is about as isolated as you can get. Now, the public sector undertook some of these
These explorations and the private sector undertook some of these explorations.
Some of them were profit motivated for commercial purposes, others were for scientific purposes,
but there was very often prizes associated with these scientific discoveries, much like
the X Prize for space travel.
And on top of that, of course, if you were to discover something, you would become famous,
You could go on the lecture circuit, you could write a book, you would become a celebrity.
So there were a lot of reasons, both economic and non-economic, why people were doing this.
There were 57 private expeditions and the other, the public did 35, the public sector
did 35 expeditions.
So there's enough on both sides to
be able to tell that both the public sector and the private sector were
actively involved in exploring the Arctic area.
Now one of the big issues about exploring an
in an area like this is tragedy. I mean, it wasn't just that you didn't get the prize or you didn't find the island or the North Pole.
In many cases, people died on these expeditions.
On the public ventures, the average was 5.9 deaths per trip.
In the private sector, there was less than one death per trip.
so in the private sector
there was a much
lower amount of
crew deaths
than in the public sector
ships lost
a lot of the ships were
destroyed sunk
uh...
one of the problems they would find is they'd get up there in the Arctic
and uh... the ice pack would form around them and the ice would strengthen
and basically crush their ship
and they'd be of course forced to flee onto the ice pack
uh... which is not uh...
all that uh...
your chances of survival after that are not too too good
there was about one quarter
of a ship lost per
uh...
expedition in the private sector
There was more than a half of a ship on average lost in the public sector.
In terms of the size of the losses, the public sector actually lost three times the amount of ship tonnage.
If you look at the size, consider the size of the ship, the public sector actually lost twice the number of ships, but three times the tonnage.
And scurvy. Scurvy is a disease. I'm sure you're all familiar with this.
If you don't have access to vitamin C on a regular basis, over a long period of time, if you don't have vitamin C, your vision becomes blurry, your bones become brittle, your gums begin to bleed and your teeth fall out and then you die.
It's a slow painful sickening process. Very often you don't die from it.
13% of private ships experience scurvy on their adventures, whereas in the public sector 47% of the ventures were known to have experienced scurvy.
The actual results are much worse than that because some of these 92 adventures or expeditions we don't know anything about.
They didn't say whether they had it or not.
Of those ventures where we know whether they said it or not, five of 22 of the private sector experience scurvy.
20 to 25 percent, whereas 14 out of 17 of the public sector ventures experienced scurvy on their expedition, so a very very high percentage of public sector expeditions experienced that disease.
The crew size is very interesting on these ventures in terms of the characteristics of these voyages.
The crews in the private sector trips average only 16 members, sometimes as few as 3, whereas
in the public sector the average crew size was 70, so a much larger crew for the public
Sector, much larger ships as well. The number of ships in the private sector averaged 1.15
ships per expedition. So most of the, you know, couldn't get below one. You got to have
So most of the private ventures were a single ship. The public sector averaged 1.63 ships. So they tended to be more than one ship. And the ship sizes were also very different. The private sector averaged 260 tons. The public sector averaged 1.63 tons. The private sector averaged 1.63 tons. The private sector averaged 1.63 tons. The private sector averaged 1.63 tons.
Average 366 tons. So they've got more ships, bigger ships and a larger crew. Now that information is given because one of the pieces of information we don't really have much information about is what their budgets were.
We can only presume from the fact that they had more ships, bigger ships and larger crews, that they also had much larger budgets in the public sector.
So basically it wasn't the case, I mean it is the case that the public sector adventures were spending more money in order to achieve their prizes.
Now, in terms of prizes, the private sector was successful in 5 out of 57 attempts.
So this is a fairly risky business.
And the private sector actually got all of the major prizes that were available to win or to discover up in the Arctic.
They discovered the Northwest Passage, they discovered the North Pole, they discovered the Franklin Expedition, which was a public sector expedition that failed.
A little bit more on that.
The public sector only got one prize out of 35 attempts.
So you have a success rate here of, what, about 9% and 3%.
Most of the great tragedies were amongst the public sector expeditions. The Franklin Expedition, which I just mentioned, was from the UK in 1845.
life, all ships were lost, all the crew died, there's evidence of widespread cannibalism.
The Greeley Expedition, which was a U.S. expedition of 1881 through 1884, 19 of 25 of the crew
The crew died during the expedition, and the DeLong Expedition of 1879 was a privately funded but government-run expedition, it's kind of unusual, the ships were lost and 20 out of 33 of the crew died.
It was something that the private sector actually provided the funding for, but the ships and the crew, particularly the crew leadership, were military based.
Now, as far as the general characteristics of these expeditions are concerned, what caused this difference here?
What caused the private sector to be safer, less expensive, less dangerous to the crew on a smaller budget, and yet they end up with almost all of the prizes?
And what causes that?
Well, the first thing you can look at is nationality. There were expeditions from Great Britain, there were expeditions from the United States, there were expeditions from many of the European powers, particularly seafaring nations like Sweden.
But there doesn't seem to be any statistical significance of where these expeditions originated from.
That doesn't seem to help explain that British were better sailors or Americans were better sailors.
Nothing like that comes out in the evidence.
you could look at the experience of the captain how many previous trips to the
Arctic had the captain made but that doesn't help explain it either because
public sector ship captains or leaders actually averaged more experience in the
So that doesn't really explain it either. Money, the amount invested in the expedition, doesn't seem to explain it because the public sector actually had a larger investment in their expeditions than did the private sector.
So what are the reasons? Some of these you would probably be able to guess.
The public sector expeditions were less motivated and they had less prepared leaders.
So the leaders of the expedition were less prepared and less motivated than the private sector expeditions were.
The public ventures also had poor leadership structures.
And the public sectors were slow to adapt to new information.
Okay, what does that actually mean in real terms?
Well, public sector leaders were often appointed to their position, whereas with private sector ventures, the leader was actually three times more likely to be the same guy who came up with the idea in the first place.
So it's like, you know, someone should discover the North Pole. I'll go do it. This is my idea. I'm going to lead the ship.
Whereas in the public sector, it would be like, you know, someone ought to go up to the Arctic and discover the North Pole. You go do it.
That's the difference. Three times more likely to be led by the person who initiated the project.
Another example of the difference here in a more intimate level is that the public sector used clothing that was tight wool clothing.
Okay, now you're walking across the ice pack in heavy wool, tight clothing, you're sweating.
And your wool clothing is getting wet, and it's below zero out.
So your clothes are actually turning to ice at some point.
The private sector adopted the native customs of using double-walled animal skin furs so
that you had two layers of leather, I guess, with fur in between.
So it was like you're walking around in a giant leather pillow, which is kind of what
That's what the Eskimos used, except prettier.
The public sector tended to use tents.
The private sector used snow houses.
Anybody in here grow up in the north where it snows?
Well, you probably don't understand this, but if the snow gets high enough, you can actually dig down in there and dig out a little area and lay down there or sleep in there and it's pretty warm.
You've got no wind, you've got no heat loss, and basically the temperature difference between
being on top of the snow in the Arctic and in a snow house underneath the snow could
probably be 50 or 60 degrees different.
That's what the Eskimos did and that's what the private sector adopted.
The private sector used dog sleds. So the movies and stories you will see about Arctic
exploration are usually following the private sector model. They used dog sleds, snowshoes
and Skis,
dog sleds, snow shoes,
you've seen snow shoes, big wide
things that you put onto your shoes so you don't go through the snow
and skis.
The public sector used boots
and men
actually pulled
the cargo sleds.
You can see that there's quite a
more or less obvious
disadvantage here to being on a public sector
venture. The private sector
used fresh meat.
They killed animals along the way and ate fresh meat.
Where the public sector
used salt meat.
Where the meat would be purchased, dried with salt, put in containers and carried along with the trip now.
What is, does anybody know what the advantage is of fresh meat over salt meat besides the taste?
No hunters, no biologists in here?
Yeah, that's true. There's more moisture in the meat, but that wasn't much of a problem.
Salt dehydrates you.
Salt does dehydrate you.
Do you use iron?
No, I don't know if there's much of a difference with iron.
Well, fresh meat has vitamin C in it, because the animal has to have vitamin C in it.
People don't make vitamin C, animals do.
That's the one genetic defect that, important genetic defect that we all have as humans,
is we don't make vitamin C like everything else on the planet basically.
So they were getting fresh vitamin C all along, whereas the public sector didn't.
And also, the more obvious thing is you don't have to carry every ounce of meat with you
through the whole trip.
You just get it along the way.
This information was well known and available and the public sector never adopted.
The public sector, in fact, continued to use a flawed open polar sea theory of the Arctic.
the open polar sea theory said that that there's a little crust of ice
around
the top of the earth but once you break through that
you're into the open polar sea
uh... that just wasn't true
the ice got thicker and thicker and heavier and heavier as you went to the
north pole
or towards the pole
and despite
knowing this they continue to operate
on the basis of this flawed theory
a few other things in terms of organizational structures
in the private ventures
responsibility was delegated
still got a couple minutes here
responsibility was delegated amongst the crew
where the public sector used a military hierarchy
so that if you lost your leader
it wasn't like getting your head cut off
so you can see that
the role of incentives played a very important, very dramatic
and in some cases very deadly
consequences
and the difference between a public and private approach to exploration.
In the next class on Friday, we're going to look at actual colonization, actual movement
of people, and look at the question, why did the people come and why did they not come
to the New World.