Skip to main content Accessibility help

We use cookies to distinguish you from other users and to provide you with a better experience on our websites. Close this message to accept cookies or find out how to manage your cookie settings.

Close cookie message
×
Hostname: page-component-cd9895bd7-gxg78 Total loading time: 0 Render date: 2025-01-03T16:54:13.209Z Has data issue: false hasContentIssue false

CHAPTER I - Capital Formation in the United States during the Nineteenth Century

from THE UNITED STATES

Published online by Cambridge University Press:  28 March 2008

By
Lance E. Davis  and
Robert E. Gallman
Edited by
Peter Mathias  and
M. M. Postan
Lance E. Davis
Affiliation:
California Institute of Technology
Robert E. Gallman
Affiliation:
University of North Carolina at Chapel Hill
Get access

Summary

Introduction

One of the grand themes of the literature on economic development relates to the behaviour of the investment rate in the early stages of modern economic growth. Economists from Adam Smith onward have given capital formation an important role in economic growth, and a considerable literature has grown up around the notion that modernization involves a rise in the share of income invested. The American record displays a very prolonged and pronounced long-term movement in this share, a movement that has not as yet received a very full analytical treatment.

The fraction of American real net national product devoted to investment rose from an average value of perhaps 6 or 7 per cent in the first four decades of the nineteenth century, to between 10 and 12 per cent in the decades just before the Civil War, to 18–20 per cent in the decades between the Civil War and the First World War (see Table 1). This development is one of the most striking aspects of American nineteenth-century economic growth, and we have chosen it as the organizing theme of this chapter. We have brought together the evidence on the volume and composition of saving, investment, income, and the capital stock and have attempted to answer two questions: (1) What role did the dramatic increase in the investment share play in American economic development? (2) How can the increase in the share be accounted for?

Type
Chapter
Information
The Cambridge Economic History of Europe , pp. 1 - 69
Publisher: Cambridge University Press
Print publication year: 1978

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Abramovitz, M., and David, P.. ‘Economic Growth in America: Historical Realities and Neoclassical Parables’, De Economist, cxxi, 3 (1973).Google Scholar
Allen, Frederick Lewis. The Great Pierpont Morgan.New York, 1949.Google Scholar
Andreano, Ralph (ed.). The Economic Impact of the American Civil War. rev. edn. Cambridge, Mass., 1967.Google Scholar
Bennett, F. P. Jr.The Story of Mutual Savings Banks.Boston, 1924.Google Scholar
Bigelow, E. B.The Tariff Question Considered in Regard to the Policy of England and the Interests of the United States.Boston, 1862.Google Scholar
Bogue, A.Money at Interest.Ithaca, N.Y., 1955.Google Scholar
Brady, Dorothy S. (ed.). Output, Employment, and Productivity in the United States after 1800. Studies in Income and Wealth, 30. New York, 1966.Google Scholar
Brenner, Y. S.Theories of Economic Development and Growth.London, 1966.Google Scholar
Brown, Murray (ed.). The Theory and Empirical Analysis of Production. Studies in Income and Wealth, 31. New York, 1967.Google Scholar
Buck, S.J.The Granger Movement.Cambridge, Mass., 1913.Google Scholar
Buley, R.The Equitable Life Assurance Society of the United States, 1859–1964.New York, 1967.Google Scholar
Burmeister, E., and Turnovsky, S. J.. ‘Capital Deepening Response in an Economy with Heterogeneous Capital Goods’, American Economic Review, LXII, 5 (December 1972).Google Scholar
Carosso, Vincent P.Investment Banking in America: A History.Cambridge, Mass., 1970.Google Scholar
Chandler, A. D. Jr, (ed.), The Railroads: The Nation's First Big Business (New York, 1965).Google Scholar
Cleveland, F. A., and Powell, F. W.. Railroad Finance. New York, 1912 (reprinted in Chandler (ed.), The Railroads).Google Scholar
,Conference on Research in Income and Wealth. Output, Input, and Productivity Measurement. Studies in Income and Wealth, 25. Princeton, 1961.
Corey, Lewis. The House of Morgan.New York, 1930.Google Scholar
Creamer, D., Dobrovolsky, Sergei P., and Borenstein, Israel. Capital in Manufacturing and Mining.Princeton, 1960.CrossRefGoogle Scholar
David, Paul A. ‘The Growth of Real Product in the United States before 1840: New Evidence and Controlled Conjectures’, Journal of Economic History, xxvii, 2 (June 1967).Google Scholar
Davis, Lance E. ‘Sources of Industrial Finance: The American Textile Industry – A Case Study’, Explorations in Entrepreneurial History, ix, 4 (April 1957).Google Scholar
Davis, Lance E. ‘Stock Ownership in the Early New England Textile Industry’, Business History Review, xxxii, 2 (Summer 1958).Google Scholar
Davis, Lance E. ‘The Investment Market, 1870–1914: The Evolution of a National Market’, Journal of Economic History, xxv, 3 (September 1965).Google Scholar
Davis, Lance E., and Gallman, R. E.. ‘The Share of Savings and Investment in Gross National Product during the 19th Century, United States of America’, in Lane, F. C. (ed.), Fourth International Conference of Economic History (Bloomington, Indiana, 1968). Paris, 1973.Google Scholar
Davis, Lance E., and North, D.. Institutional Change and American Economic Growth.Cambridge, 1971.CrossRefGoogle Scholar
Davis, Lance E., and Payne, P. L.. ‘From Benevolence to Business: The Story of Two Savings Banks’, Business History Review, xxxii, 4 (Winter 1958).Google Scholar
Davis, Lance E., Easterlin, Richard A., Parker, William N., et al. American Economic Growth: An Economist's History of the United States.New York, 1972.Google Scholar
Denison, E. F.The Sources of Economic Growth in the United States.New York, 1962.Google Scholar
Dewey, Davis R.Financial History of the United States.New York, 1915.Google Scholar
Durand, E. D.The Finances of New York City.New York, 1898.Google Scholar
Edwards, G.The Evolution of Finance Capitalism.London and New York, 1938.Google Scholar
Ellet, C.An Essay on the Laws of Trade in Reference to the Works of Internal Improvement in the United States. Richmond, Virginia, 1839.Google Scholar
Engerman, Stanley. ‘The Economic Impact of the Civil War’, Explorations in Entrepreneurial History, 2nd ser., III, 3 (Spring/Summer 1966), reprinted in Andreano, (ed.), Economic Impact of the American Civil War.Google Scholar
Evans, G. Heberton. Business Incorporations in the United States, 1800–1943.New York, 1948.Google Scholar
Fishlow, Albert ‘Levels of Nineteenth-Century American Investment in Education’, Journal of Economic History, xxvi, 4 (December 1966).Google Scholar
Fishlow, Albert. American Railroads and the Transformation of the Ante-bellum Economy.Cambridge, Mass., 1965.Google Scholar
Fogel, Robert W.The Union Pacific Railroad: A Case of Premature Enterprise.Baltimore, Md, 1960.Google Scholar
Frederikson, D. M. ‘Mortgage Banking in America’, Journal of Political Economy, II (1894).Google Scholar
Friedman, Milton, and Schwartz, Anna. A Monetary History of the United States, 1867–1960.Princeton, 1963.Google Scholar
Fuchs, V. R. (ed.). Production and Productivity in the Service Industries. Studies in Income and Wealth, 34. New York, 1969.Google Scholar
Gallman, R. E., ‘The Agricultural Sector and the Pace of Economic Growth: U.S. Experience in the Nineteenth Century’, in Klingaman, D. C. and Vedder, R. K. (eds.), Essays in Nineteenth Century Economic History (Athens, Ohio, 1975).Google Scholar
Gallman, Robert E., ‘The Statistical Approach: Fundamental Concepts as Applied to History’, in Taylor, George Rogers and Ellsworth, Lucius F., Approaches to American Economic History (Charlottesville, Virginia, 1971).Google Scholar
Gallman, Robert E. and Weiss, Thomas J., ‘The Service Industries in the 19th Century’, in Fuchs, Victor R. (ed.), Production and Productivity in the Service Industries, Studies in Income and Wealth, 34 (New York, National Bureau, 1969).Google Scholar
Gallman, Robert E. ‘Changes in Total U.S. Agricultural Factor Productivity in the Nineteenth Century’, Agricultural History, XLVI, I (January 1972).Google Scholar
Gates, P. W.The Illinois Central Railroad and Its Colonization Work.Cambridge, Mass., 1934.CrossRefGoogle Scholar
Goldsmith, Raymond W.A Study of Savings in the United States. 3 vols. Princeton, 1955.Google Scholar
Goodrich, C.Government Promotion of American Canals and Railroads, 1800–1890.New York, 1960.Google Scholar
Greef, Albert O.The Commercial Paper House in the United States.Cambridge, Mass., 1938.Google Scholar
Green, G.Finance and Economic Development in the Old South: Louisiana Banking, 1804–1865.Palo Alto, Calif., 1972.Google Scholar
Griliches, Zvi. ‘Research Cost and Social Returns: Hybrid Corn and Related Innovations’, Journal of Political Economy, LXVI, 5 (October 1958).Google Scholar
Hammond, Bray. Banks and Politics in America from the Revolution to the Civil War.Princeton, 1957.Google Scholar
Hibbard, B. H.A History of the Public Land Policies.Madison, Wisconsin, 1965.Google Scholar
Hicks, J. D.The Populist Revolt.Minneapolis, Minn., 1931.Google Scholar
Holmes, G. K., and Lord, J. S.. ‘Report on Real Estate Mortgages in the United States’. US Census Office, issued as Final Census Report, vol. xii, the nth Census. Washington, [1890].Google Scholar
Hughes, J. R. T.The Vital Few.Boston, 1966.Google Scholar
James, John A. ‘The Evolution of the National Money Market, 1888–1911’, Journal of Economic History, xxxvi, i (March 1976).Google Scholar
Johnson, A. M., and Supple, B. E.. Boston Capitalists and Western Railroads.Cambridge, Mass., 1967.CrossRefGoogle Scholar
Juster, F. T., and Lipsey, R.. ‘A Note on Consumer Asset Formation in the United States’, Economic Journal, lxxvii, 308 (1967).Google Scholar
Keyes, Emerson W.A History of Savings Banks in the United States. 2 vols. New York, 1878.Google Scholar
Klingaman, D. C., and Vedder, R. K. (eds.). Essays in Nineteenth Century Economic History.Athens, Ohio, 1975.Google Scholar
Knowles, Charles E.History of the Bank for Savings in the City of New York, 1819–1829.New York, 1929.Google Scholar
Kuznets, Simon (ed.). Income and Wealth of the United States: Trends and Structure. Income and Wealth, series ii. Cambridge, 1952.Google Scholar
Kuznets, Simon. ‘Economic Growth and Income Inequality’, American Economic Review, xlv, i (March 1955).Google Scholar
Kuznets, Simon. Capital in the American Economy: Its Formation and Financing.Princeton, 1961.Google Scholar
Kuznets, Simon. ‘Quantitative Aspects of the Economic Growth of Nations, Part X’, Economic Development and Cultural Change, xv, 2 (January 1967).Google Scholar
Ladin, J. ‘Mortgage Credit in Tippecanoe County, Indiana, 1865–1880’, Agricultural History, xli (1967).Google Scholar
Larson, Henrietta. Jay Cooke: Private Banker. Cambridge, Mass., 1936.CrossRefGoogle Scholar
Lewis, W. A.The Theory of Economic Growth.London, 1955.Google Scholar
Macauley, Frederick R.Some Theoretical Problems suggested by the Movement of Interest Rates, Bond Yields, and Stock Prices in the United States since 1856.New York, 1938.Google Scholar
Martin, J. G.Seventy-Three Years' History of the Boston Stock Market.Boston, 1871.Google Scholar
McGouldrick, Paul F.New England Textiles in the Nineteenth Century: Profits and Investment. Harvard Economic Studies, 131. Cambridge, Mass., 1968.Google Scholar
Meyer, B. H., MacGill, C., et al. History of Transportation in the United States before 1860. Carnegie Institution of Washington publication no. 215c. Reprinted Forge Village, Mass., 1948.Google Scholar
Miller, W. (ed.). Men in Business.Cambridge, Mass., 1952.Google Scholar
Myers, Margaret, ‘The Investment Market after 1919’, in , H. F. Williamson (ed.), The Growth of the American Economy (New York, 1944).Google Scholar
Myers, Margaret. The New York Money Market, 1. New York, 1931.Google Scholar
Navin, T., and Sears, M.. ‘The Rise of the Market for Industrial Securities, 1887–1902’, Business History Review, xxx (1955).Google Scholar
Parker, William N. (ed.). Trends in the American Economy in the Nineteenth Century. Studies in Income and Wealth, 24. Princeton, 1960.Google Scholar
Payne, P. L., and Davis, Lance E.. The Savings Bank of Baltimore, 1818–1 866: A Historical and Analytical Study.Baltimore, Md, 1956.Google Scholar
Poor, Henry V.History of the Railroads and Canals of the United States of America, I. New York, 1860.Google Scholar
Popple, C. S.The Development of Two Bank Groups in the Central Northwest.Cambridge, Mass., 1944.CrossRefGoogle Scholar
Primack, Martin. ‘Land Clearing under Nineteenth Century Techniques’, Journal of Economic History, xxii (December 1962).Google Scholar
Primack, Martin. ‘Farm Construction as a Use of Farm Labor in the United States, 1850–1900’, Journal of Economic History, xxv (March 1965).Google Scholar
Ripley, William Z.Main Street and Wall Street.Boston, 1927.Google Scholar
Rosenberg, N. ‘Technological Change in the Machine Tool Industry, 1840–1910’, Journal of Economic History, xxiii, 4 (December 1963).Google Scholar
Rostow, W. W.The Stages of Economic Growth. 2nd edn. Cambridge, 1971.Google Scholar
Severson, R. F. Jr. ‘The Source of Mortgage Credit for Champaign County, 1865–1880’, Agricultural History, xxxvi (July 1962).Google Scholar
Sobel, R.The Big Board: A History of the New York Stock Market.New York, 1965.Google Scholar
Solow, Robert M. ‘A Contribution to the Theory of Economic Growth’, Quarterly Journal of Economics, lxx (1956).Google Scholar
Soltow, Lee (ed.). Six Papers on the Size Distribution of Wealth and Income. Studies in Income and Wealth, 33. New York, 1969.Google Scholar
Soltow, Lee. ‘Evidence on Income Inequalities in the United States, 1866–1965’, Journal of Economic History, xxix, 2 (June 1969).Google Scholar
Soltow, Lee. ‘Economic Inequalities in the United States in the Period from 1790 to 1860’, Journal of Economic History, xxxi, 4 (December 1971).Google Scholar
Taylor, George Rogers, and Ellsworth, Lucius F. (eds.). Approaches to American Economic History.Charlottesville, Virginia, 1971.Google Scholar
Temin, Peter. ‘General Equilibrium Models in Economic History’, Journal of Economic History, xxxi, i (March 1971).Google Scholar
Trescott, P. B.Financing American Enterprise.New York, 1963.Google Scholar
True, A. C.A History of Agricultural Experimentation and Research in the United States, 1607–1925, including a History of the United States Department of Agriculture. USDA Miscellaneous Publication no. 251. Washington, 1937.Google Scholar
Ulmer, M. J.Capital in Transportation, Communications, and Public Utilities: Its Formation and Financing.Princeton, 1960.Google Scholar
,United States. Bureau of the Census. Historical Statistics of the United States: Colonial Times to 1957.Washington, 1960.
,United States. Comptroller of the Currency. Annual Report, 1916.Washington, 1917.
,United States. Department of Commerce. Standard Industrial Classification Manual.Washington, 1945.
Uselding, Paul. ‘Conjectural Estimates of Gross Human Capital Inflows to the American Economy, 1790–1860’, Explorations in Economic History, ix, i (Fall 1971).Google Scholar
Uselding, Paul. ‘Factor Substitution and Labor Productivity Growth in American Manufacturing, 1839–1899’, Journal of Economic History, xxxii, 3 (September 1972).Google Scholar
White, Gerald. A History of the Massachusetts Hospital Life Insurance Company.Cambridge, Mass., 1955.CrossRefGoogle Scholar
Wilcox, J. M.A History of the Philadelphia Savings Fund Society, 1816–1916. Philadelphia, 1916.Google Scholar
Williamson, H. F. (ed.). The Growth of the American Economy.New York, 1944.Google Scholar
Williamson, H. F., and Smalley, O.. Northwestern Mutual Life: A Century of Trusteeship.Evanston, Illinois, 1957.Google Scholar
Williamson, Jeffrey. ‘Watersheds and Turning Points: Conjectures on the LongTerm Impact of Civil War Financing’, Journal of Economic History, xxxrv, 3 (September 1974).Google Scholar
Zartman, L.The Investment of Life Insurance Companies.New York, 1906.Google Scholar

Save book to Kindle

To save this book to your Kindle, first ensure [email protected] is added to your Approved Personal Document E-mail List under your Personal Document Settings on the Manage Your Content and Devices page of your Amazon account. Then enter the ‘name’ part of your Kindle email address below. Find out more about saving to your Kindle.

Note you can select to save to either the @free.kindle.com or @kindle.com variations. ‘@free.kindle.com’ emails are free but can only be saved to your device when it is connected to wi-fi. ‘@kindle.com’ emails can be delivered even when you are not connected to wi-fi, but note that service fees apply.

Find out more about the Kindle Personal Document Service.

Available formats
×

Save book to Dropbox

To save content items to your account, please confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your account. Find out more about saving content to Dropbox.

Available formats
×

Save book to Google Drive

To save content items to your account, please confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your account. Find out more about saving content to Google Drive.

Available formats
×