Front Page Titles (by Subject) Self-Interest vs. Slavery - Literature of Liberty, January/March 1978, vol. 1, No. 1
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Self-Interest vs. Slavery - Leonard P. Liggio, Literature of Liberty, January/March 1978, vol. 1, No. 1 
Literature of Liberty: A Review of Contemporary Liberal Thought was published first by the Cato Institute (1978-1979) and later by the Institute for Humane Studies (1980-1982) under the editorial direction of Leonard P. Liggio.
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Self-Interest vs. Slavery
“The Consolation of Slavery.” The Economic History Review (UK), August 1976: 491–503.
R. W. Fogel and S. Engerman in their book, Time on the Cross (1974), claim to make “ten principal corrections of the traditional characterizations of the slave economy.” The central proposition asserts that American slaveholding was economically rational from the point of view of the owner; that they saw it as a profitable investment; and that the use of slave labor in agriculture and other activities was predictable from the theory of optimum use of economic reasources.
Fogel and Engerman base the measurement of profitability on a very simple model: the consol price/yield relationship where the slaveholder expects his slaves to yield a constant net revenue stream over their lives (on the average). One can question this model on the grounds that its simplicity precludes its use for analyzing the yield of any asset—human or otherwise—to which risk attaches. Even in the case of an equity, one cannot use the current rate of interest as a proxy for all future expected rates of interest because no guaranteed market exists for a particular equity.
Given the price of slaves, Fogel and Engerman derive estimates of the net revenue expected to accrue from a slave over a life time. For this they use a production function for southern agriculture. In estimating a production function it is crucial that we derive the physical marginal product of the input independently of the input price. If we fail to do so, a tautological situation arises where one cannot know if the measure of net revenue justifies the price paid. All attempts to measure physical marginal productivity risk falling into this trap of circular reasoning. It seems that Fogel and Engerman have done so. If we are to specify correctly the production function, we must obtain measures of input services derived from homogeneous units of inputs. We cannot aggregate them by their market value to estimate the marginal physical productivity of inputs. In the case of Fogel and Engerman, it begs the question of profitability and rational allocation at the outset. Besides, even if we assume that the supplies of factor inputs are infinitely elastic at the market price (as far as the individual entrepreneur is concerned), we should still simultaneously estimate the production function and the demand equation. In Time on the Cross, however, the two authors estimate the production function singly.
Thus we find the measurement of outputs and inputs is inadequate for testing the hypotheses concerning profitability of inputs, i.e., slaves.
The main criticism against Fogel and Engerman lies in their search for certainty and finality in their answers. This may be understandable in terms of the political background to the debate about slavery in the U.S. But we must employ patience in seeking elusive finality about such an issue. Economic historians can fruitfully use “cliometrics” (the application of measurement and econometric techniques to historic events) only on those questions which lend themselves to quantitative answers. Even when modestly employed, cliometrics will give answers that by their nature must be qualified by our doubts about the correctness of the data.