Deadweight Loss and the American Civil War: The Political Economy of Slavery, Secession, and Emancipation

568 Pages Posted: 2 Oct 2012

See all articles by Jeffrey Hummel

Jeffrey Hummel

San Jose State University - Department of Economics

Date Written: October 1, 2012


Two broad positions have dominated the history of economic thought with respect to chattel slavery. The view of the classical economists, dating back as far as Adam Smith and including a good many abolitionists, was that slavery was inefficient and therefore unprofitable. The contrasting position of the new economic historians, most closely identified with Robert Fogel and Stanley Engerman, is that slavery was profitable and therefore efficient. Both positions are partly wrong (as well as partly right). Southern slavery was indeed profitable but nevertheless inefficient; it operated like other obvious practices — from piracy through monopoly to government subsidies — where individual gains do not translate into social benefits. In the terminology of economics, it was a system that imposed significant “deadweight loss” on the Southern economy, despite being lucrative for slaveholders.

The paper presents both theoretical arguments and empirical evidence for the peculiar institution’s inefficiency. In the process it throws into fresh perspective many historical controversies about the antebellum South. A recognition of slavery’s deadweight loss has major implications for the origins of the Civil War. Slavery’s survival required extensive subsidies from government at all levels. A federal Fugitive Slave Law was among the most crucial ways that the national government socialized the system’s enforcement. That is why runaway slaves were such an important ingredient in sectional strife. A comparative investigation of slavery not just within the United States but elsewhere demonstrates that, wherever slaves could easily run away, the entire system was compromised.

Keywords: slavery, deadweight lost, Civil War, emancipation

JEL Classification: N00, N4, N41, N42

Suggested Citation

Hummel, Jeffrey, Deadweight Loss and the American Civil War: The Political Economy of Slavery, Secession, and Emancipation (October 1, 2012). Available at SSRN: or

Jeffrey Hummel (Contact Author)

San Jose State University - Department of Economics ( email )

One Washington Square
San Jose, CA 95192
United States

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