[Kinser wrote] Panic of 1819 was one of the worst.
Mike: In what way was it worst? If we look at the stock market, it peaked at 2.95 in Jun 1818 and bottomed at 2.51 in July 1819, a 15% decline. How does that compared to other panics like the one in in 1837? This panic saw prices drop from a peak of 3.23 in January 1837 to the bottom at 2.44 in June 1837, a 24% decline. The 1857 Panic saw a 42% decline from 2.26 in Jan 1857 to 1.30 in October 1857. The 1873 panic saw a 47% drop from 5.15 in Feb 1873 to 2.73 in June 1877. And finally there is the 27% decline for the 1893 panic, from 5.61 in Jan 1893 to 4.08 in Aug 1893. In terms of the stock market, the worst of the 19th century panics was the one in 1873.
What about the economy? Well the panics were all associated with recessions. Dates are available after 1853. We have an 18 month recession for1857, 65 months for 1873 and 6 months for 1893. In terms of recession length 1873 was the worst. The antebellum economy was largely agrarian so cotton prices/output might be a better indicator. For the 1819 panic prices fell 42% and output fell 4%. For the 1837 panic prices fell 36% and output 27%.
For the 1857 panic prices were little affected and output did not decline at all. The 1857 panic is known as a railroad crash. This term and the lack of significant impact on cotton suggests that it largely affected the industrial economy and its financiers. The broader agrarian economy was largely unaffected. On the other hand the 1837 crash showed by far the largest impact on cotton production, and is known as the cotton crash. Land sales fell by 73% from 1856 to 1857.
Now the 1819 panic had a small impact on cotton output and stock prices suggesting that it had a small economic impact. It almost certainly was not one of the worst panics economically. On the other hand, land sales also declined by 73%, which means 1819 was as much a big a deal for the land speculation business as the 1837 panic. Assume that the price of land is derived from the potential profits that can be derived from best potential use of the land. With the invention of the cotton gin in 1794, the cotton-growing business had become super-hot. The keenest measure for the profit potential for this industry would be the price of cotton. It follows that land value should be correlated with cotton price. The fact that the 1819 panic showed the largest decline in cotton prices, suggests that it showed the largest decline in land prices too. This means that from the point of view of a land speculator (or least a Southern one) 1819 was one of the worst panics.
And why is this important? Andrew Jackson was a land speculator. He was in a position to rhetorically translate the impact of central bank tightening in 1818 to bottom-line impact on ordinary Americans, leading to his meteoric rise in the 1820’s as the defender of working-class Americans against what he characterized as the oppression of a wealthy elite epitomized by the central bank. How much of a role the central bank played in the panic is unclear, economists debate this. But reality does not matter politically, perception does. And the perception was that the bank was responsible, just as "billionaires are rigging the economy against the middle class" is a perception of the cause of working class woes today.
Although not all that important economically, the 1819 panic was very important to the political-economy. Here is a passage from the introduction to the Rothbard article you cited:
What profoundly distinguishes Rothbard’s approach from the prevailing approach is his insistence upon treating economic quantities and processes as unique and complex historical events. Thus, he employs the laws of economic theory in conjunction with other relevant disciplines to trace each event back to the nonquantifiable values and goals of the particular actors involved. In Rothbard’s view, economic laws can be relied upon in interpreting these nonrepeatable historical events because the validity of these laws—or, better yet, their truth—can be established with certainty by praxeology, a science based on the universal experience of human action that is logically anterior to the experience of particular historical episodes. It is in this sense that it can be said that economic theory is an a priori science.
Rothbard’s approach treats economic quantities and processes as unique and complex historical events. For example, the 1819 panic is simultaneously an economic process and a complex historical event. That is, the 1819 is one of the most important events in the political-economy of the 19th century. The way you presented this was as if you thought the 1819 Panic was one of the most severe economic downturns of the era, like the recent recession was. It was nothing of the sort. But it was one of the most important events in the political economy. Recall, the first economic philosophers referred to their field as political economy. Von Mises is still operating in that sense.
My problem with Austrians is that what they offer is not science. Theory is not an explanation for observed reality that improves by comparison of theoretical prediction with reality, as is done in science. Austrian theory is derived independently of evidence: “anterior to the experience of particular historical episodes.” I have a problem with their "praxeology", in which they derive a theory of what makes humans tick from "self evident" facts. To me this resembles a proven inadequate path to knowledge. Replace praxeology with theology and you get Thomism, whose "scientia" was supplanted centuries ago by modern science.
Mike: In what way was it worst? If we look at the stock market, it peaked at 2.95 in Jun 1818 and bottomed at 2.51 in July 1819, a 15% decline. How does that compared to other panics like the one in in 1837? This panic saw prices drop from a peak of 3.23 in January 1837 to the bottom at 2.44 in June 1837, a 24% decline. The 1857 Panic saw a 42% decline from 2.26 in Jan 1857 to 1.30 in October 1857. The 1873 panic saw a 47% drop from 5.15 in Feb 1873 to 2.73 in June 1877. And finally there is the 27% decline for the 1893 panic, from 5.61 in Jan 1893 to 4.08 in Aug 1893. In terms of the stock market, the worst of the 19th century panics was the one in 1873.
What about the economy? Well the panics were all associated with recessions. Dates are available after 1853. We have an 18 month recession for1857, 65 months for 1873 and 6 months for 1893. In terms of recession length 1873 was the worst. The antebellum economy was largely agrarian so cotton prices/output might be a better indicator. For the 1819 panic prices fell 42% and output fell 4%. For the 1837 panic prices fell 36% and output 27%.
For the 1857 panic prices were little affected and output did not decline at all. The 1857 panic is known as a railroad crash. This term and the lack of significant impact on cotton suggests that it largely affected the industrial economy and its financiers. The broader agrarian economy was largely unaffected. On the other hand the 1837 crash showed by far the largest impact on cotton production, and is known as the cotton crash. Land sales fell by 73% from 1856 to 1857.
Now the 1819 panic had a small impact on cotton output and stock prices suggesting that it had a small economic impact. It almost certainly was not one of the worst panics economically. On the other hand, land sales also declined by 73%, which means 1819 was as much a big a deal for the land speculation business as the 1837 panic. Assume that the price of land is derived from the potential profits that can be derived from best potential use of the land. With the invention of the cotton gin in 1794, the cotton-growing business had become super-hot. The keenest measure for the profit potential for this industry would be the price of cotton. It follows that land value should be correlated with cotton price. The fact that the 1819 panic showed the largest decline in cotton prices, suggests that it showed the largest decline in land prices too. This means that from the point of view of a land speculator (or least a Southern one) 1819 was one of the worst panics.
And why is this important? Andrew Jackson was a land speculator. He was in a position to rhetorically translate the impact of central bank tightening in 1818 to bottom-line impact on ordinary Americans, leading to his meteoric rise in the 1820’s as the defender of working-class Americans against what he characterized as the oppression of a wealthy elite epitomized by the central bank. How much of a role the central bank played in the panic is unclear, economists debate this. But reality does not matter politically, perception does. And the perception was that the bank was responsible, just as "billionaires are rigging the economy against the middle class" is a perception of the cause of working class woes today.
Although not all that important economically, the 1819 panic was very important to the political-economy. Here is a passage from the introduction to the Rothbard article you cited:
What profoundly distinguishes Rothbard’s approach from the prevailing approach is his insistence upon treating economic quantities and processes as unique and complex historical events. Thus, he employs the laws of economic theory in conjunction with other relevant disciplines to trace each event back to the nonquantifiable values and goals of the particular actors involved. In Rothbard’s view, economic laws can be relied upon in interpreting these nonrepeatable historical events because the validity of these laws—or, better yet, their truth—can be established with certainty by praxeology, a science based on the universal experience of human action that is logically anterior to the experience of particular historical episodes. It is in this sense that it can be said that economic theory is an a priori science.
Rothbard’s approach treats economic quantities and processes as unique and complex historical events. For example, the 1819 panic is simultaneously an economic process and a complex historical event. That is, the 1819 is one of the most important events in the political-economy of the 19th century. The way you presented this was as if you thought the 1819 Panic was one of the most severe economic downturns of the era, like the recent recession was. It was nothing of the sort. But it was one of the most important events in the political economy. Recall, the first economic philosophers referred to their field as political economy. Von Mises is still operating in that sense.
My problem with Austrians is that what they offer is not science. Theory is not an explanation for observed reality that improves by comparison of theoretical prediction with reality, as is done in science. Austrian theory is derived independently of evidence: “anterior to the experience of particular historical episodes.” I have a problem with their "praxeology", in which they derive a theory of what makes humans tick from "self evident" facts. To me this resembles a proven inadequate path to knowledge. Replace praxeology with theology and you get Thomism, whose "scientia" was supplanted centuries ago by modern science.