Estimating Early American Gross Domestic Product

ver the past half-century, there have been several attempts to appraise the performance of the econo0 my of the United States during the colonial and early national periods, With one notable exception, the estimates have been retrospective extrapolations from our increasingly sophisticated understanding of the operation of the early nineteenth-century U.S. economy. These efforts are difficult to assess because they have been founded upon dissimilar assumptions, stated in different terms, using varying points of departure. Considering all such estimates side by side, expressing them in comparable terms, and critiquing their potential conflicts seems a good way to begin any attempt to get a better grasp of the economic development of early America. With the data thus arrayed and analyzed, it becomes clear that there is a certain congruity in the figures for the benchmark year 1774 (see table I). ’ This realization then becomes the starting point for a new, unified set of estimates of colonial gross domestic product (GDP) (see table 2). * As Lance Davis and Stanley Engerman (1999, 21) have observed, summing up the state of our understanding-and, effectively, the data offered in table 2: “There was probably some slow, but positive, growth in per capita income and wealth in most parts of the colonies between original settlement and the time of the American Revolution. Slow as it was, growth was probably higher [in early British America] than in most of the rest of the world at that time. Growth was, however, almost certainly much slower than the rates in the United States after the middle of the nineteenth century. ” In appraising what others have attempted, it is important that we have a clear understanding of our underlying premises. The point of departure for much that follows is Engerman and Robert Gallman’s (1983) “U.S. Economic Growth, 1783-1860,” in which they defined with considerable clarity the ideas and terminology usually employed. In their review of the existing literature, they summarized a good deal of the information that is presented herein and offered incisive insights into many of the studies reviewed and e~aluated. ~ Although they did not on that occasion offer any new estimates of their own, their methodological suggestions and judgments about the soundness and significance of work done to date were most instructive and laid the foundation for the estimates that I will develop here. In the section “Concepts and Measurements,” Engerman and Gallman (1983, 2-9) sorted through the fundamental parameters of national income accounting and set the model for what this summary attempts-and, by implication, for what others may wish to attempt. Thus, following their example, I suggest that we acknowledge the Thirteen Continental Colonies as a “national economy” for all such discussions of the early U.S. GDP; that we employ “income . [as] the preferred measure of growth”; that we use “income” and “product” interchangeably in this context; that we recognize the need to consider the problems for long-term comparisons of income because some portion of output failed to pass through markets; and that we address both aggregate and per capita measures of income. This discussion is grounded in Engerman and Gallman’s guidelines. As a critical first step, all estimates discussed in this article have been restated in terms of 1840 dollars, the base year employed by some (Goldin and Lewis 1980) but not by all of these studies. Values expressed in other terms are reduced to this base year using a commodity price index that extends well back into the middle of the seventeenth century (McCusker 2000). With 1840 as our base year, the estimates of seventeenthand eighteenth-century economic performance can be and are linked with those for the nineteenth and twentieth centuries, making long-term comparisons po~sible. ~ It was Raymond W. Goldsmith (1959) who launched the attempts to assess quantitatively the growth of the early American economy, though he did so almost as an afterthought. Having established that real per capita gross