One of the greatest challenges I face as an economics professor is helping students understand the true cost of anything isn’t what you pay for it. That’s part of the cost, for sure, but not the only cost.
And in addition to being a monstrous crime against humanity, new research by economists at the University of Chicago and The Ohio State University helps us understand just how immense the financial costs of slavery in America really were—costs that weren’t merely monetary.
Before digging into the new research, let me explain how economists work with costs and benefits using a common illustration that connects with my Florida Gulf Coast University students. When you choose to attend college, you make an investment in probable future benefits, and some of those benefits may prove financial—such as access to superior job opportunities that may result in a higher average salary over time—but many are not. While earning a degree, you learn about the world around you and likely forge lifelong friendships with other students. You also develop discipline and work habits that you may not have needed in high school. These attributes might literally pay off in your career and will likely pay off throughout your life outside of work, especially if you become a parent.
Just as the benefits of an economic activity may be both monetary and nonmonetary, so too are the costs. The price tag of attending college is just one of its many costs. Most of my students forgo potential income, especially during tourist season, to spend time attending class and studying. There also are high costs for my students who are parents; time attending class is time that cannot be used to nurture their children. And often our hardest-working students put off self-care, such as sleeping and eating well; they pay dearly for costs such as stress, despair or disappointment.
This is why economists call the true cost of any activity its “opportunity cost.” The real cost of attending college is what you had to forgo in your next best option during those years, which brings us to the new paper by the University of Chicago’s Richard Hornbeck and Ohio State’s Trevon Logan, “One Giant Leap.” The two economists push back against the conventional narratives that slavery was economically productive even if it was morally abhorrent, and that emancipation caused a significant economic downturn, particularly in the American South. Instead, the authors attempt to quantify the economic opportunity costs of enslavement, concluding that slavery was not only inhumane but also a highly inefficient approach to producing goods and services. That is, the authors weigh the real economic costs and benefits of slavery in terms of what society missed out on through enslavement rather than a free society for all.
Their conclusion? Emancipation resulted in immense economic gains for the U.S.—from 4% to 35% of the Gross Domestic Product.
But how? According to Hornbeck and Logan, we have been underestimating just how costly slavery was as a production method. Using historical data, the authors put a dollar amount on the extent to which slavery squandered the creative potential of the enslaved. In short, slavery may have been a low-cost production method, but its opportunity costs were much higher than previously thought. Their bottom line: slavery actually cost the economy roughly $40 per year for each enslaved person because they weren’t free. And multiplying that $40 by the 4 million captives counted in the 1860 census, the economic boost to the economy from emancipation amounted to at least 4% of GDP in 1860.
Production under slavery was inexpensive in money terms. But it recklessly squandered the productive potential of millions. And, according to the authors, if you look only at GDP in assessing the economic impact of emancipation, you’re committing a fundamental economic mistake.
Victor V. Claar is an associate professor of economics in the Lutgert College of Business at Florida Gulf Coast University.
