Soon after they published their now-classic article “The Economics of Slavery in the Ante Bellum South,” Conrad and Meyer (1958a; b) got a long letter from public choice pioneer Gordon Tullock, who spent 1958 as a post-doctoral fellow at the University of Virginia. Tullock framed the occasion as a friendly complaint in that the two economic historians had scooped his own “projected article’ on the subject, but Tullock wanted to explore the implications of Conrad and Meyer’s argument that antebellum slavery was profitable. He agreed with their now-famous finding that slavery was profitable but offered an important caveat: “[From] the standpoint of the ‘catchees’”—the enslaved—slavery meant “overwhelming” harm, which extended to others.
“Not only does the individual who is taken suffer a vast loss by this act,” he continued, “but the whole of society is disrupted and forced to operate on a much lower level of productivity by this additional and terrible risk.” Tullock, therefore, held to a highly qualified version of slavery’s profitability and efficiency, both of which were institutionally contingent. Slavery, he argued, could be profitable to plantation owners and economically inefficient simultaneously. When its welfare effects were measured in total, slavery became ‘economically bad for the South, and hence contrary to the general position taken in your article” (Tullock n.d.).Footnote 1 The ensuing correspondence between Tullock and John R. Meyer gives fresh insight into the early development of public choice and establishes a basis for public choice’s anti-discrimination tradition (Magness, 2020).
Tullock’s theory of slavery remains the least-developed and least-acknowledged of these contributions, and it is important to recover it in light of recent works suggesting slavery broke the “Malthusian cycle” and was essential to American economic progress (Baptist, 2014, Beckert and Rockman 2016).Footnote 3 Furthermore, it suggests that contrary to claims in the growing literature criticizing “neoliberalism,” classical liberal thinkers like Tullock and others working in the public choice tradition did not ignore questions of racial justice, nor were they complicit in upholding white supremacy, as e.g. Kimberlé Williams Crenshaw et al., (2019, p. 8) maintain.
By approaching slavery as an example of rent-extracting government capture, Tullock linked insights from classical economists like Smith and Cairnes to the emerging cliometric evidence on slavery’s profitability and viability. Slavery’s reliance on political capture adds needed nuance to our understanding of slavery and market institutions. Whereas Conrad and Meyer, along with subsequent cliometric work, established the economic profitability of slavery, its alleged efficiency remains a murkier question absent the role of enforcement costs borne by the public at large and the costs slavery imposes on the enslaved. It can be simultaneously profitable and extremely inefficient.
Tullock explains how political exchanges and non-market choices functioned in an economy based on slavery, which came at the expense of economic efficiency and human rights. Tullock explained why slavery’s enforcement was centralized and why its costs were spread out over southern taxpayers, the southern poor, and the slaves themselves. In this regard, he explained why slavery could be profitable to individual enslavers but detrimental to the southern economy overall. Slavery, from this regard, is neither necessary for free-market capitalism nor good for it. Given recent perspectives contending slavery was exceptionally profitable and necessary for capitalism, recovering Tullock’s contribution is especially timely.
PredictIt, a small online political-futures market operated by an Australian university, has won an important court ruling against the Commodity Futures Trading Commission, which seeks to shut it down. The case could eventually shake the foundations of the regulatory state.
I wrote about the case, Clarke v. CFTC, on these pages in November. PredictIt is a web site that allows traders to buy and sell real-money futures contracts on politics. As of Monday, for instance, you could buy a contract that Joe Biden will be re-elected in 2024 for 45 cents. If he wins, the contract will pay $1, and you’ll earn a profit of 55 cents. The site was established as an experimental laboratory by the University of Victoria to explore whether such markets could produce predictive information that might be better than conventional polling.
We can’t be sure why the CFTC decided to put a thriving political futures market out of business. After the PredictIt decision, six Democratic senators, led by Oregon’s Jeff Merkley and including Massachusetts’ Elizabeth Warren and Rhode Island’s Sheldon Whitehouse, wrote to CFTC Chairman Rostan Behnam urging the commission not to permit any new political markets.
But that’s a rearguard action. Thanks to arrogant regulatory overreach, the attack on political markets backfired in the Fifth Circuit. PredictIt will stay in business, and regulators will face new accountability.
Despite newspapers claiming Amazon harms small businesses, the actual businesses suggest the reverse is true. Of the small businesses selling online, about a fourth use Amazon, second only to selling through their own websites. And although Amazon is the most popular marketplace for small businesses, many businesses do not feel captured by Amazon: Most also use eBay, Etsy, and Walmart.
Amazon has thrived by introducing transformative technologies and fostering retail competition. Perhaps the FTC should defer to customers, as they determine the true economic value of Amazon’s services and innovations.