American Economic History

Economics 315

Prerequisite: EC-105 and EC-110

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Course Objectives

1. To help you clarify the scope and meaning of economic theory by questioning its descriptive validity and proscriptive value;

2. To help you identify appropriate institutional structures and related social attitudes that affect the rate and pattern of economic development;

3. To develop a knowledge of the origins and evolution of the American industrial economy;

4. To develop a conceptual framework of the economic process by discussing economic determinism and economic potentiality.

Required Reading

Alfred D. Chandler, Jr., The Visible Hand: The Managerial Revolution in American Business (Cambridge: Harvard University Press, 1977).

Martin J. Sklar, The Corporate Reconstruction of American Capitalism, 1890-1916: The Market, The Law, and Politics (Cambridge: Cambridge University Press, 1988).

Course Description

The course will study the outstanding developments and shifting relationships of the American economic system during the twentieth century. Primary focus will be given to the evolution of institutions which facilitated economic development over the century since 1870--the period that marks modern capitalism. The following principles will be explored in the class.

The Modern Corporate Enterprise

1. The modern business enterprise took the place of market mechanisms in coordinating the activities of the economy and allocating its resources. The visible hand of management replaced the invisible hand of market forces.
2. The modern multiunit business enterprise replaced small traditional enterprise when administrative coordination permitted greater productivity, market control, and higher profit rates than coordination by market mechanisms.
3. Managerial hierarchy was created so as to internalize the activities of many business units within a single enterprise.
4. Modern business enterprise appeared when the volume of economic activities made administrative coordination more profitable than market coordination.
5. As the multiunit business enterprise grew in size and diversity, (a) the salaried managers who directed these hierarchies became increasingly technical and professional; and (b) the management of the enterprise became separated from its ownership.
6. As the large enterprise grew and came to dominate major sectors of the economy, they altered the basic structure of these sectors and of the economy as a whole.

State Regulaton of the National Economy

1. The modern multiunit business enterprise must be distinguished for the economic system of corporate capitalism. Competitive concentration of business enterprise was a precondition for the corporate reorganization of the economy.
2. The modern corporate-administered economy replaced the competitive-proprietary regime when a system of corporate property relations and administered markets came to characterize the economy.
3. The corporate-administered economy was created so as to rationalize the economy. It reorganized the economy in a manner that allowed corporations to function within a stable, predictable, and secure environment.
4. The corporate-administered order appeared when economic rationalization could not be attained by mergers and voluntary agreements. Corporate business led the movement for federal regulation of the economy and such regulation was channelized by the regulated interest to meet its own end.
5. State regulation of corporate capitalism assigned to the corporation, including investment banking and central banking, the primary task, the initiative, of managing the market and structuring the economy, and to the state the secondary, reactive task of regulating the corporation and policing economic power.
6. The American program of corporate-administered markets affirmed the subordination of state policy to the corporate property-production system. For this reason, the corporate regime was unable and unwilling to create social stability and organizational order. The perennial search for order in economic affairs was the handmaiden of the perennial impulse of American corporations to disrupt and reorganize the economy.

Outline

I The Drive to Industrial Maturity

1 Performance of the Economy, 1865-1914

2 The South, the North, and Regional Contrasts

3 The Growth of Manufacturing

4 The Growth of Urban Economy

5 Money, Prices, Income, and Productivity

II The Managerial Revolution in American Business

1 The Traditional Processes of Production and Distribution

2 The Revolution in Transportation and Communication

3 The Revolution in Distribution and Production

4 The Integration of Mass Production with Mass Distribution

5 The Management and Growth of Modern Industrial Enterprise

III The Structure of National Economic Regulation

1 Legal Aspects of Property

2 The Market and the Law

3 The Politics of Anti-Trust

4 Federal Incorporation Law

5 The Corporate Liberal Solution

6 The American Economy in Crisis

7 New Deal Labor Policy

8 The Limits of the New Deal

Course Requirements

1. Writing Assignments. Students are required to write two essays that cover reading materials and class lectures. A description of these assignments is attached to this syllabus.

2. Class Attendance. Attendance is not required in this class. You should be mindful, however, that the issues developed in this class are complex and the instructor has high expectations. A satisfactory understanding of these issues cannot be obtained by using another student's notebook. It is essential for you to participate in all classes because learning is the student's responsibility. Refraining from discussions and lack of attendance will affect the final course grade for the following reasons: (a) When students are actively involved in the learning task, they learn more than when they are passive recipients of information. This is not an informational course. (b) Students learn what they practice. You must learn to think critically about the economy: if you practice passive learning, you learn to be a passive thinker. (c) If you do not work hard at learning, I cannot work hard at teaching. You must make very heavy demands on me as a teacher so that you learn the class material.

3. Plagiarism. Plagiarism is the use of another's work or ideas without attribution. Paraphrasing a book without indicating where that material came from constitutes plagiarism as much as does copying from another student's work. Plagiarism of any work required for this course will result in a grade of "0" for the course. The student's name will then be reported to the proper college authorities so that administrative action can be taken.

Term Paper Assignment

Objectives

(1) to accurately represents, reports, or summarizes class material;

(2) to select appropriate material most relevant to the question posed.

(3) to use material and ideas in ways that consider alternatives.

(4) to apply material and ideas by comparing and contrasting.

(5) to critically perceive connections and unearth contradictions.

(6) to persuasively evaluate ideas and arguments.

The essays should bring together features and techniques established in the field of economic analysis. It should demonstrate the ability to progress from personal experience to abstract reasoning, i.e. to see patterns, to form concepts, to make connections, and then, to ask questions.

Although you may choose any writing form you wish, some students may find it useful to adopt the following: (1) briefly summarize the central, major, or key arguments of the works or issues under consideration; (2) Compare and contrast the works or issues, viz., set them side by side in order to examine and show their resemblances and differences; (3) Evaluate the works or issues, viz., determine the significance or worth of the works by careful appraisal.

Stipulations

The essay must be typed with one inch margins and double spacing.

Your analysis should be presented with precision (exactly or sharply defined or stated) and concession (marked by brevity of expression of statement: free from all elaboration and superfluous detail).

The essay should avoid ideological statements that are not supported by rational analysis.

The essay should include a title, introduction, body, and conclusion.

The introduction of your paper should include a statement of the argument made in the essay and a guide to how this argument will be developed. The argument should take an affirmative position, and then, in the discussion, you should defend that position.

The body of your essay should critically analyze the argument posed in the introduction. The analysis should be divided into sections and subtitles should be used. Critical means to consider the merits and demerits of a problem and to judge accordingly. Analysis means to separate a whole into its component parts. It is the examination of a complex, its elements, and their relationships. Critical analysis requires clear thinking.

The conclusion should include a summary of the analysis presented in the body and a statement of the significance your argument has to contemporary issues.

Assignments

One

Drawing on your knowledge of the American economy, write an essay which examines the themes of The Visible Hand. The essay should address the following:
(1) Briefly summarize the central arguments of Chandler's work; explain Chandler's view of the rise of the modern business enterprise and the significant economic features of such enterprises.
(2) Compare and contrast Chandler's argument with the economic theory of the firm; that is, set them side by side in order to show their resemblances and differences.
(3) Provide a detailed examination of some particular part or parts of that argument -- such as high-volume technology; administrative coordination; national markets; top and middle managerial function; strategic advantages; decreasing transportation, communication, and transaction costs; industrial concentration and economic centralization; horizontal and vertical integration; corporate control of supply markets and product markets; etc. -- and explore the manner in which these parts interact with other important characteristics.
(4) Evaluate Chandler's thesis that the modern business enterprise took the place of market mechanisms in coordinating the activities of the economy and allocating its resources.
While preparing this essay keep in mind the objectives and stipulations outlined in the course syllabus. The essay will be evaluated according to these guidelines.

Two

Drawing on your knowledge of the American economy, write an essay which examines the themes of The Corporate Reorganization of American Capitalism. The essay should address the following:
(1) briefly summarize the central arguments of Sklar's work; explain Sklar's view of modern corporate capitalism and the significant economic features of such an economic system.
(2) provide a detailed examination of the modern regulatory state including a discussion of the differences and similarities among "regulatory" policy (Wilson), "statist" policy (Roosevelt), and "property" policy (Taft).
(3) Compare and contrast Sklar's argument of the origins of corporate capitalism and Chandler's argument of corporate capitalism; that is, set them side by side in order to show their resemblances and differences.
(4) evaluate Sklar's thesis that state regulation of corporate capitalism assigned to the corporation the primary task, the initiative, of managing the market and structuring the economy, and to the state the secondary, reactive task of regulating the corporation and policing economic power.
While preparing this essay keep in mind the objectives and stipulations outlined in the course syllabus. The essay will be evaluated according to these guidelines.

Evaluation Guidelines

Weak Paper:
(a) Finds one element to compare;
(b) Describes how the system works in each instance without further comparison, i.e., gives two quasi-parallel sets of descriptions rather than cross analysis;
(c) Moves rapidly to evaluation and judgment on the relative merits;
(d) Absent a willingness or ability to explore the relationships;
(e) Absent historical empathy or the willingness to suspend judgment long enough to understand the context and assumptions of the period.

Excellent Paper:
(a) Finds four elements related to assignment topic to compare;
(b) Suggests a shared assumption that links treatment of the elements compared;
(c) Generates a meta-topic implied but not given in the assignment, that offers an additional level of analysis;
(d) Distinguish between alternatives, develops distinctions within the topic to distinguish between the forms.