Human Capital and Slavery.

Long post ahead. From Marginal Revolution, a graduate paper from Stanford:

“The Dynamics of Adverse Selection in the Market for Slaves,” (2007).

…I estimate the evolution of relative prices of observably identical slaves from the Old South and New South. In the 1810s, slaves from the Old South commanded prices 15 percent lower than identical slaves from the New South; by the 1850s, they commanded prices 14 percent higher. I combine these price data with data on slave populations, interregional sales, and other slave migration to infer the degree of adverse selection. I find the expected quality of a slave who was sold was just 61 percent of the quality of his unsold cousin.

“I find the expected quality of a slave who was sold was just 61 percent of the quality of his unsold cousin.” I always find it interesting how economic tools can go from slavery to modern day and not really blink. I’m imagining the techniques (cousins as instrumental variables) in that paper are identical to the tools that are broken out to see how college education effects wages (the word “quality”, which does all the heavy lifting there, also shows up in the same literature – in case you were wondering, it means profitability).

Robert Fogel’s Nobel-Prize winning Time on the Cross was the first modern work to take the economics approach to slavery’s raw data. It’s full of all kinds of prices and markets and production theory and how it relates to Slavery in the South. It is a fascinating work, but I think it is fascinating more for its problems and flaws than for what it appears to be its strengths. I keep meaning to write a post about it, and I’m sure I will someday.

One thing of note from that book is a quick throwaway reference by Fogel to Human Capital. Human Captial is Gary Becker’s idea of that we make “investments” in ourselves, the same way a firm makes investments in research and factories. This thought so dominates our neoliberal thinking – refocusing our attitudes towards education, health and family as atomistic (distinctly non-political) entrepreneurial activities – that it is interesting to see an old economics book from the time period (mid-70s) bring it up as something new and eccentric (from a guy doing demand curves on slaves, at that). I think this passage is important, so I’ll reprint it (my italics):

In recent years [mid-1970s] economists have extended the use of the concept of capital beyond its usual application to machines, buildings, and other inanimate objects. They have applied the concept of capital to the wealth inherent in the capacity of human beings to perform labor, calling such wealth “human capital.” This extension of the concept seemed odd at first because it was applied not to explain behavior in nineteenth-century slave societies but in twentieth-century free societies. Nobody doubts that human beings were a form of capital in slave society…

What made the application of the concept of human capital to free societies seem odd is that free people are not traded in well-defined markets and hence do not command market prices. However, the absence of explicit market prices on human beings does not mean that free men do not actually have capital value, but only that the absence of a trade in human beings usually prevents their capital values from being made explicit.…

Viewed in this light, the crucial difference between slave and free society rests not on the existence of property rights in man, in human capital, but on who may hold title to such property rights. (p 232-233)

I love this passage. On the first approximation it’s fun academic in-fighting – “your research really only applies to the stuff I’ve already done.” The “We’ve have had investment in human capital before, it was called slavery” line-of-thought is fantastic when you consider how much of the social sciences (beyond economics, including sociology, political science and educational policy) are predicated on rational human capital maximization these days. But I think there is a lot more, conceptually as to how to view one’s labor.

Check out the italics – does being able to quantify/price (“make explicit”) all of one’s activities in market terms have the same effect of trading oneself in a market? Which is of interest, because the call of a neoliberal world is to do exactly that – view oneself as entrepreneurial through and through, all the way down. If so, what implications does that involve?

(And Fogel is wrong above; in equilibrium our human capital is “made explicit” through wages just as if we were traded; as Deleuze (or any inequality report, or management textbook) points out, in the post-Keynesian society of control “the corporation [is] work[ing] more deeply to impose a modulation of each salary” – the human capital market is becoming more developed, and prices/wages are evolving to become better at capturing that information. Stratification and inequality isn’t an accident but a design, the obvious result of it.)

I don’t know. Maybe you do.