Public Choice Economics and the Salem Witchcraft Hysteria

Kenneth A. Loparo

• Publisher: Palgrave Pivot
• Year: 2015
• ISBN:
  9781137506351
• Topic: Economics
• Subtopic: Economic History
• Index: Economics

Public Choice Economics and the Salem Witchcraft Hysteria provides an economics perspective on the witchcraft episode, and adds to the growing body of work analyzing prominent historical events using the tools of economics.

1

The Political Economy of Historical Events

Abstract: The opening chapter of the book recounts some of the earlier studies on the political economy of historical events. It is hoped that doing so will illuminate “the economic way of thinking” in approaching these widely varying topics for readers outside of the field of economics. Historical events included in this chapter range from the colonization of Australia during the 1700s and 1800s by British convicts to the rout of George Custer’s forces at the Little Bighorn. The economics principles covered in this chapter include the divergence between public economic interests and private economic interests, Alchian and Allen’s relative price effect, price controls (ceilings), the modern theory of bureaucracy and the public choice economics principle of vote maximization.

Mixon, Franklin G. Public Choice Economics and the Salem Witchcraft Hysteria. New York: Palgrave Macmillan, 2015. DOI: 10.1057/9781137506351.0007.

Research on the political economy of historical events is often some of the most interesting and illuminating of the principles of economics found in the literature. These studies typically focus on well-known historical figures, while, at times, bringing to the fore relatively unknown individuals in world history. Their uniqueness and value in showing the insight of economics means that they not only add to historians’ account of events, but also often make compelling anecdotes for classroom instruction. Given that this book offers another example of the insight of economics in explaining a well-known historical episode, that of the witchcraft phenomenon in Salem, Massachusetts, in 1692, it is useful to recount some of the earlier entries in this genre of economics scholarship. It is hoped that doing so will illuminate “the economic way of thinking” in approaching these widely varying topics, a group to which the approach taken in this book belongs, for readers outside of the field of economics.

Convicts and colonization

A particularly intriguing story in this genre involves the colonization of Australia by England in the late 1700s. As Staff (2008) points out, Captain James Cook discovered the east coast of Australia in 1770, claiming it for King George III as New South Wales. Colonization of New South Wales began in the 1780s, just in time for the British Crown (Staff, 2008):

The agrarian revolution in Britain, and the population explosion in the cities, resulted in an increase in crime. As the American Revolution meant that no more convicts could be sent there, the only way to overcome the overcrowding in the jails was to establish a penal colony in the land discovered by Captain James Cook. The convicts would be transported, never to return to Britain.

Between 1788 and 1850, England would send 162,000 convicts in 806 ships to colonize Australia, with the first of these—the First Fleet—departing England in May of 1787 and arriving in Australia in January of 1788 (Dunn and McCreadie, 2008). At first, mortality rates on these voyages were high, hovering around 50 percent (Ekelund and Price, 2012). After analysis and recommendations by Sir Edwin Chadwick (1800–1890) in 1862 (Chadwick, 1862), regarded by Ekelund and Price (2012: viii) as one of the two or three most important policymakers in nineteenth-century England, mortality rates declined substantially. Chadwick noted that the ship captains directing the voyages were paid on a per-prisoner basis at the point of embarkation (i.e., England). As a result, these self-interested ship captains made the decision to cut costs (e.g., provide little food and medicine), while at the same time they attempted to maximize revenue by overboarding their ships with prisoners (Ekelund and Price, 2012).¹ Chadwick suggested that ship captains instead be paid for each prisoner who disembarked in New South Wales, forcing ship captains to consider smaller passenger manifests and the provision of essential supplies, such as food and medicine. As a result, mortality rates fell to as low as two percent (Ekelund and Price, 2012).² The story of Chadwick and the British colonization of Australia is one highlighting the importance of incentives in shaping human behavior. Simply stated, incentives matter (Ekelund and Price, 2012).

Solons and shortages at Valley Forge

Economic incentives were again ignored in colonial America during the Revolutionary War. Citing Schnettinger and Butler (1979: 41), Baumol and Blinder (2011) point out that one of the more prominent “enemies” facing the colonial army during the American Revolution was the Pennsylvania legislature.³ To explain this paradox, Baumol and Blinder (2011) indicate that General George Washington’s army arrived at Valley Forge, Pennsylvania, at the end of 1777, where it was quartered through the beginning of 1778. By the time Washington’s colonials arrived at Valley Forge, commodity prices were 480 percent above their prewar average, due largely to excessive printing of Continental Notes (i.e., money) by the Continental Congress (Greaves, 1972: 82). According to Greaves (1972) and Baumol and Blinder (2011), the Pennsylvania legislature decided to implement price ceilings—maximum legal limits on the prices of selected goods and services—on the commodities needed by the Continental Army. This would have included food, clothing, shoes and many other items vital to the war effort. As Baumol and Blinder (2011) state, the theory behind the legislature’s action was that of reducing the expense of supplying the colonial army. As Greaves (1972: 82) puts it:

It was thought that this would reduce the cost of feeding and supplying our Continental Army. It was expected to reduce the burden of the war.

As these authors point out, and as students of economics principles learn, the price ceilings implemented by the Pennsylvania legislature created burdens that Washington’s army had to overcome.⁴ For example, in the absence of price ceiling legislation war-related commodities sold in Pennsylvania during 1777–1778 would have been sold at what economists refer to as market (-clearing) prices, which are the result of the interplay between the market demand for and the market supply of the war-related goods. The price ceilings chosen by the Pennsylvania legislature would have established legal prices for these war-related goods that were below the original market (-clearing) prices. However, these price ceiling regulations would ultimately drive a wedge between the market demand for and the market supply of war-related commodities in Pennsylvania, with (1) buyers choosing to buy more of these commodities, and (2) sellers choosing to sell fewer of these commodities. The result is a shortage of, in this case, war-related commodities (e.g., food, shoes) that were essential to Washington’s forces.

In this case in history, the anticipated result held, as Greaves (1972: 82) describes:

It was almost impossible to buy any of the domestic commodities needed for the Army ... Many farmers refused to sell their goods at the prescribed prices. Few would take the paper Continentals. Some, with large families to feed and clothe, sold their farm products stealthily to the British in return for gold. For it was only with gold that they could buy the necessities of life with which they could not produce themselves ... On December 23, 1777, George Washington wrote to the president of the Congress, “ ... we have no less than two thousand eight hundred and ninety-eight men now in camp unfit for duty, because they are barefoot and otherwise naked ... I am now convinced beyond a doubt, that, unless some great and capital change suddenly takes place, this army must inevitably be reduced to one or other of these three things: starve, dissolve, or disperse in order to obtain subsistence in the best manner they can.”

Baumol and Blinder (2011) note that the ill-fated experiment in price ceilings was recognized by the Continental Congress, which, in June of 1778, adopted a resolution advising the colonies to repeal and cease any and all regulations limiting the prices of commodities. Citing Bezanson (1951), Greaves (1972: 83–84) concludes by noting that, after June 1, 1778, the army’s commissary agents were instructed to pay “market prices” for the commodities they wished to purchase from local suppliers, and that, as a result, the colonial army was better provisioned in the fall of 1778 than it had been up to that point. Unfortunately for those soldiers quartered at Valley Forge during the previous fall, that lesson was learned too late.

Custer’s fateful choice

McClure and Van Cott (1994: 135) aptly describe a chapter in the U.S. Army’s defeat at the Little Bighorn in 1876, stating that “[Lieutenant Colonel George Armstrong] Custer’s 7^th Cavalry battalion of 260 men charged into the open jaws of the largest Indian war party in the history of North America.” The rest of the story is history to most history students in the United States. However, as McClure and Van Cott (1994) point out, the publication of research by Connell (1984) provides an economics lesson—one similar to that learned from Chadwick’s policy proposal concerning England’s colonization of Australia—from Custer’s military blunder near the Little Bighorn River in Montana.

Given that historical accounts indicate that Custer divided the U.S. 7th Cavalry into three battalions, with, as McClure and Van Cott (1994) note, Custer retaining five companies with 260 soldiers, while his subordinate commanders, Captain Frederick Benteen and Major Marcus Reno, each retained three companies (consisting of 156 soldiers across each three-company set), it would seem that the U.S. 7th Cavalry took about 572 soldiers into battle near the Little Bighorn River. Although there are no official records as to the number of Lakota Sioux and Cheyenne warriors, led by the Sitting Bull, that Custer faced, McClure and Van Cott (1994) point to the typically cited figure of 3,000. If Custer’s blunder was not going into battle outnumbered about 5.25 to 1, particularly given that he attacked in the afternoon after losing the element of surprise, then it must have been dividing his force into three battalions, with 260, 156 and 156 soldiers, respectively, with each attacking separately.

Of course, Custer’s actions represent an inexcusable blunder if he believed he was facing 3,000 or more warriors. How many was he expecting? Citing Connell (1984), McClure and Van Cott (1994: 135–136) provide an answer:

Government agents at Indian reservations reported population counts. The U.S. Army used the counts as a source of military intelligence. More Indians at the reservation implied fewer Indians at the Bighorn [battlefield]. Connell reports that reservation agents’ salaries varied directly with reservation populations. This provided an incentive for agents to overstate the count. In Connell’s words, “ ... an agent foolish enough to report a decrease in population was taking a bite out of his own paycheck.” (p. 263)

Of course, the self-interested reservation agents responded as predicted. As McClure and Van Cott (1994: 136) state, “[p]rior to the battle agents reported 37,391 Indians; after the battle, a U.S. Army count turned up 11,660.” Again citing Connell (1984), McClure and Van Cott (1994: 136) conclude:

The result, Connell writes, was that “falsified information trickled down through the bureaucracy, eventually reaching armies in the field, and Custer had been told to expect [1,500] warriors.” (p. 263)

Custer had, however, a second source of intelligence on that day—Crow scouts—whose lives (and compensation) depended, unlike the reservation agents’, upon accurate information (Windolph, 1947; McClure and Van Cott, 1994). Custer’s scouts informed him that he would be attacking the largest native village that they had ever seen. After informing Custer of the dire situation facing the U.S. 7th Cavalry, the Crow sco...

Table of contents

• Cover
• Title
• 1  The Political Economy of Historical Events
• 2  Puritanism and the Founding of Massachusetts Bay Colony
• 3  A Brief History of the Salem Witchcraft Phenomenon
• 4  Modern Theories of the Witchcraft in Salem
• 5  Public Choice and the Economics of Religion
• 6  A Public Choice Perspective on the Salem Witchcraft Hysteria
• 7  Some Economics of the Aftermath of Salem
• Bibliography
• Index