Classical Inefficiency.



Slavery’s classical inefficiency resulted from restrictions on slaveholders freeing their slaves. These restrictions had been in place since the colonial period and were only briefly relaxed in the upper South after the American Revolution. By the time of the Civil War, seven slave states had gone so far as to outlaw manumission without specific legislative approval. The South’s free-labor sector tended to comprise jobs requiring initiative, discretion, and diligence—in other words, jobs that commanded higher wages because the output had greater market value. Many African Americans, if free, might have performed these well–paid jobs. They therefore could have produced either of two possible streams of future output—one less remunerative while slaves and one more remunerative while free. Such a discrepancy made possible a mutually profitable deal for a slave to buy freedom from his or her owner.

Why did slaveholders erect such barriers when it was in their individual self–interest to permit self–purchase? 

One reason is that a large and prosperous free black community would have made it easier and more appealing for slaves to escape or resist. As the free black populations grew in Delaware and Maryland after the Revolution, for example, the threat of runaways sped up the process of voluntary manumission. By 1860, 90 percent of Delaware’s African Americans were already free, and in Maryland, half were. Insofar as restrictions on manumission confined laborers to lower-valued jobs, it lowered output and simulated the impact of a high marginal tax rate on work. It also stifled the creation of human capital among African Americans and contributed to the South’s lack of urbanization, two economic costs of slavery brought up by many of F&E’s critics. Thus, many slaves were less productive than they would have been if free, just as classical economists had surmised.

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