Rent-Seeking for Madness: The Political Economy of Mental Asylums in the US, 1870 to 1910

Abstract

From the end of the Civil War to the onset of the Great War, the United States experienced an unprecedented increase in commitment rates for mental asylums. Historians and sociologists often explain this increase by noting that public sentiment called for widespread involuntary institutionalization to avoid the supposed threat of insanity to social well-being. However, this explanation neglects the increased role of rent-seeking within psychiatry and the broader medical field over the same period. In this paper, we argue that increased political influence from mental healthcare providers contributed significantly to the rise in institutionalization. We test our claim empirically by using the taxonomy of medical regulations from 1870 to 1910, as well as primary sources documenting rates of insanity at the state level. Our findings provide an alternative explanation for the historical rise in institutionalization within the US.

Keywords: Rent-Seeking, Health Policy, American Economic History, Asylums

JEL Classification: I18, N31, N32