Richard Brookhiser has a history lesson for The Donald on avoiding the Civil War in the current (5/29/17) NRODT. One part, ending slavery by buying them, fits into our expertise from almost 40 years ago. We believe there was a financial opportunity to avoid the Civil Was that politics failed to find. Here we only consider the financial cost but the human cost of the Civil War, like slavery, is huge.
Sidebar One: We wrote this paper for a grad class in economic history almost 40 years ago. We don’t have the references or the exact details anymore so we are painting with a broad brush. End Sidebar One.
It seems simple because the Civil War was extraordinarily expensive that the government could buy out the slaves and avoid the Civil War and everybody would be at least as well off. For example, here is an estimate of the actual cost that comes in at over $6 billion. So when Richard quotes estimates from $600 to $900 million it is easy to wonder why there was a war.
Sidebar Two: There is strong evidence of an efficient market in slaves. Given the pertinent characteristics like age and gender, the value of a slave can be reasonably estimated based on prices of actual sales. According to the census there were almost 4 million slaves in the US in 1860 so Richard is estimating an average cost of $150 to $225. Of course, individual prices would depend on pertinent characteristics. A 20 year-old male will be worth more than a 60 year-old female. End Sidebar Two
The problem with this analysis is that it is after the fact or ex-post. Nobody expected that the Civil War would be as long or costly as it was and both sides thought they would win. The analysis needs to be ex-ante. What did folks think the Civil War would cost before it started? They, see Sidebar, expected it to last a few months and cost a small number of millions. The financial solution, and this was discussed, was to free the slaves at birth and death (B&D). The B&D solution reduces the costs in two ways. First, babies are cheap because they are not productive for several years. Second, it reduces the present value of the expenditures because the amounts are paid later. It also provides a plausible way out for both sides because it doesn’t end slavery immediately. For the same reason, it will have negative reactions too.
The bottom line is that it would have worked. The present value of B&D expenditures was less than the expected cost of the Civil War. It was not easily avoidable but it was avoidable. James Buchanan might have been worse that our Immediate Past President.