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Labor Scarcity and the Problem of American Industrial Efficiency in the 1850's: A Reply

Published online by Cambridge University Press:  03 February 2011

Peter Temin
Peter Temin
Affiliation:
Massachusetts Institute of Technology
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Extract

In a recent issue of this Journal, Ian Drummond took issue with my article discussing the relation of labor scarcity to British observations of American industrial efficiency in the 1850's. I tried to show that (1) the contemporary observations were not specific enough to show whether or not Americans were using the same technology as the British; (2) even if the observations showed that the Americans used the same technology as the British, it would not follow that the higher ratio of land to labor in the United States had induced a higher ratio of capital to labor; and (3) if the observations proved that the Americans used a more efficient technology than the British, the connection between this fact and the high land-labor ratio was not clear. Under (2), I tried to demonstrate that the land-labor ratio and the capital-labor ratio were separate, and that it was improper to make inferences about the latter from data about the former. In fact, if we assume that land was not used in manufacturing, the data imply that while the land-labor ratio in America was higher than in Britain, the capital-labor ratio was lower.

Type
Notes
Information
The Journal of Economic History , Volume 28 , Issue 1 , March 1968 , pp. 124 - 125
Copyright
Copyright © The Economic History Association 1968

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References

1 Temin, Peter, “Labor Scarcity and the Problem of American Industrial Efficiency in the 1850's,” Journal Of Economic History, XXVI (09 1966), 277–98CrossRefGoogle Scholar;Drummond, Ian, “Labor Scarcity and the Problem of American Industrial Efficiency in the 1850's: A Comment,” Journal Of Economic History, XXVII (09 1967), 383–90CrossRefGoogle Scholar.

2 To show that the graphs are essentially the same with and without continuous substitutability, I derive an ordinary isoquant for manufacturing from Drummond's Figure 1. The isoquant descends vertically to point Q1 on line T1, then goes in a straight line to Qx on T3, and horizontally to the right from there. Since Qj on T2 lies above the straight line from Q1 on Tx to Q1 on T3, it is not possible to draw a price line through Qx on T2 that does not also lie above one or the other of the points representing the same output, and technique T2 would never be used in a competitive economy. While Tx and T3 are the only techniques that will be used, any combination of labor and capital along this isoquant can provide the same output, Q1 and no combination below it can do so. From this (convex) isoquant, a factor-price frontier similar to the one in my Figure 2 can be derived by the normal means. It will differ from mine only in being composed of two straight-line segments, and my conclusion can be inferred from it.

3 See Fogel, Robert William, “The Specification Problem in Economic History,” Jouhnal Of Economic History, XXVII (09 1967), 302–6Google Scholar.