The Economic Illiteracy of High School History By Bryan Caplan

In 11th grade, I took Advanced Placement U.S. History. I enjoyed it at the time. Once I started studying economics, however, I was outraged by the economic illiteracy of my history textbooks. Mainstream historians barely mentioned the unprecedented miracle of sustained economic growth. Instead, they focused on distribution: How poor workers used labor unions and regulation to pry their fair share from the heartless capitalists who employed them. These historians never mentioned the negative side effects of unionization and labor market regulation – or even the view that such negative side effects existed. My historical miseducation eventually inspired my lecture on “Why the Standard History of Labor Is Wrong.”

Every now and then, though, I question the accuracy of my memory. Could my history textbooks really have been so awful? The other night, overcome by nostalgia, I decided to check. Ray Billington‘s American History Before 1877 was one of our two main texts. I flipped straight to the section on early industrialization and learned the following:

The Plight of the Worker. The rise of the factory system placed such a gulf between employers and employees that the former no longer took a personal concern in the welfare of the latter. As competition among manufacturers was keen and the labor supply steadily increasing through foreign immigration, they were able to inflict intolerable working conditions on laborers. Hours of labor were from thirteen to fifteen a day, six days a week, while wages were so low after the Panic of 1837 that a family could exist only if all worked. Hence child labor was common. Factories were usually unsanitary, poorly lighted, and with no protection provided from dangerous machinery. Security was unknown; workers were fired whenever sickness or age impaired their efficiency. As neither society nor the government was concerned with these conditions, the workers were forced to organize to protect themselves.

The good news: My memory turns out to be quite accurate. The bad news: Billington’s economic illiteracy is more severe than I thought. The more economics you know, the worse he seems. Misconceptions this awful have to be addressed sentence-by-sentence – and sarcasm cannot be avoided.

The rise of the factory system placed

such a gulf between employers and employees that the former no longer

took a personal concern in the welfare of the latter.



First problem: The main determinant of wages and working conditions is workers’ marginal productivity, not “personal concern.” Are we really supposed to believe that implicit employer charity was a large fraction of employee compensation during the pre-modern era?

Second problem: Personal concern clearly plays some role in modern businesses (see here and here for starters). Today’s firms exhibit a much larger “gulf” between employers and employees than could possibly have existed in the first half of the 19th century. Are we really supposed to believe that personal concern was important in the pre-modern period, disappeared in the 19th century, then returned in the 20th?

Third problem: Keynesian economists emphasize that wage fairness norms lead to labor surpluses, also known as “unemployment.” So the overall effect of greater personal concern on workers’ well-being is unclear. Mediocre jobs you can actually get are far better than great jobs you can’t get.

As competition

among manufacturers was keen and the labor supply steadily increasing

through foreign immigration, they were able to inflict intolerable

working conditions on laborers.

“Keen competition” should make it harder, not easier, for employers to pay workers less than their marginal productivity. And if conditions were so “intolerable,” why did immigrants keep pouring in? Why did agricultural workers keep moving to the factories?



Hours of labor were from thirteen to fifteen a day, six days a week, while wages were so low after the Panic of 1837 that a family could exist only if all worked.

The second sentence is absolutely absurd. Did every family in 1837 that failed to employ every family member (babies included?) starve to death? Victims of the Irish potato famine – which began a full eight years later – might immigrate to such hellish conditions, but no one else would.

Billington’s sloppy language also makes his claim that the typical workyear exceeded 4000 hours per year very hard to believe. One of GMU’s economic historians tells me that 3000 hours per year is a much more reasonable figure.



Hence child labor

was common.

Compared to growing up on a 19th-century farm?



Factories were usually unsanitary, poorly lighted, and

with no protection provided from dangerous machinery.

No protection at all? So smiths didn’t wear gloves? Construction workers didn’t wear boots?



Security was

unknown; workers were fired whenever sickness or age impaired their

efficiency.

Automatic firing for sickness? Wouldn’t this lead to high turnover costs, especially considering the unsanitary conditions?

Automatic firing for age? So 19th-century firms had no deadwood at all? Wow.



As neither society nor the government was concerned with

these conditions, the workers were forced to organize to protect

themselves.

Aren’t workers part of “society”? If conditions were really as bad as Billington says, how could workers find the spare time to organize? And if workers were “forced to organized,” how come most workers didn’t organize? While we’re on the subject, what about the idea that successful unionization has a negative employment effect for workers – especially workers who aren’t in the union?

Even more aggravatingly, Billington barely mentions the consumers of early factory production. The rise of mass production implies the rise of mass consumption. “Plight of the workers” indeed.

So what should history textbooks say about these matters? This: Working conditions during the early Industrial Revolution were bad by modern standards, but a major improvement by the standards of the time. Factory work looked good to people raised on backbreaking farm labor – and it looked great to the many immigrants who flocked to the rising centers of industry from all over the world. This alliance of entrepreneurs, inventors, and workers peacefully kickstarted the modern world that we enjoy today.

And what of the “workers’ movement”? A halfway decent textbook would emphasize that it wasn’t quantitatively important. Few workers belonged, and they didn’t get much for their efforts. Indeed, “workers’ movement” is a misnomer; labor unions didn’t speak for most workers, and were often dominated by leftist intellectuals. A fully decent textbook would discuss the many possible negative side effects of labor market regulation and unionization – so students realize that the critics of economic populism were neither knaves nor fools.

The Big Picture: Industrialization was the greatest event in human history. Critics then and now were foolishly looking a gift horse in the mouth. Until every student knows these truths by heart, history teachers have not done their job.