How bad were the Navigation Acts really?

by on July 4, 2013 at 7:50 am in Books, History, Law, Political Science | Permalink

Adam Smith supported them and he was no mercantilist.  Here is another take:

…that remains the consensus view among a broad sample of modern scholars: a recent study concluded that nearly 90 percent of the economists and historians surveyed agreed with proposition that “[t]he costs imposed on the colonists by the trade restrictions of the Navigation Acts were small.”

if the burden of the Navigation Acts was so slight — no more than one percent of GDP, according to Thomas’ calculation — why did the Americans make such a fuss over it?  The short answer is that although the burden to the American colonies as a whole was low, it did not fall evenly across the entire economy: some sectors and regions suffered disproportionately, while others were barely affected.  The regions and sectors that suffered the most from the Navigation Acts tended to be the strongest supporters of the American Revolution.

That is from the forthcoming useful book by Richard S. Grossman Wrong: Nine Economic Policy Disasters and What We Can Learn from Them.  For the two relevant Robert Paul Thomas pieces (jstor) see here and here.

To further brighten your day, here is a non-gated piece by Robert Whaples, “Where is There Consensus Among American Economic Historians?  The Results of a Survey on Forty Propositions” (pdf).

John Thacker July 4, 2013 at 7:54 am

Also some of the same areas that protested most strongly against the Embargo Act. But in that case, Congressional gains and the threat of losing elections were enough caused Jefferson and Madison’s party to reverse course.

prior_approval July 4, 2013 at 8:26 am

Those irrational though thankfully not marginal revolutionaries – thinking that the right to develop their own nation could be measured in something other than a rational consideration of the minor economic burden of being subjects of the crown.

John Thacker July 4, 2013 at 9:32 am

Err, support for the American Revolution being higher in those areas disproportionately affected by the Navigation Acts suggests that, in fact, marginal analysis applied to the revolutionaries.

crs July 4, 2013 at 8:40 am

“it did not fall evenly across the entire economy: some sectors and regions suffered disproportionately, while others were barely affected … regions and sectors that suffered the most … tended to be the strongest supporters of the American Revolution”

so is one of the things “we can learn” in the book that distributions, not just aggregates matter? still not exactly a mainstay of modern econ policy. also seems popular perception of a policy need not align with expert (or even objective) measures.

Ed July 4, 2013 at 8:48 am

I thought that the problem in the 1760s and 1770s was that the British government started to try to actually enforce the Acts.

Brian Donohue July 4, 2013 at 1:30 pm

I thought the reduced threat from Native Americans after the F&I war set the stage for American independence. All else is pretext.

dearieme July 4, 2013 at 9:49 am

“why did the Americans make such a fuss over it?” Because some Americans wanted more political power and looked around for issues to make a fuss of that might help them get such power perhaps? Or were those politicians different from all other politicians in recorded history?

Adrian Ratnapala July 4, 2013 at 11:59 am

There are always people wanting political power, but there is only sometimes a revolution.

sort_of_knowledgable July 4, 2013 at 12:34 pm

Well it seems to me that most of the American’s who made a fuss over it were already leaders among the colonists. It’s more like they didn’t want to lose power to the crown.

GiT July 4, 2013 at 2:50 pm
dan in philly July 4, 2013 at 11:49 am

The lesson is always try to exploit those least able to.fight back…

Jon July 4, 2013 at 12:45 pm

Disappointing to see the disagreement concerning the Great Depression, but not surprised. Tribalism has clouded people’s thinking on this subject. It is shocking that WWII is still taught as the reason the depression ended. The case for gold policy being the root issue is very powerful.

Larry July 4, 2013 at 2:18 pm

That’s the part that I found most depressing. It was all about monetary policy. Everything else was a sideshow.

mulp July 4, 2013 at 3:01 pm

So, by not repeating the 30s’ Fed policy, the US economy recovered stunningly from the bubble collapse proving that if only the Fed had printed money, the Depression would have ended on its own?? Obviously far more jobs have been created since the crash by easy money than FDR’s big government hiring of millions of people who otherwise were unemployable from lack of job skills??

Seems to me that easy money simply drives up intangible asset prices and does nothing to create jobs because the people with access to the easy money can’t consume more, so they buy securities which are great buys because that drives up the prices.

Larry July 5, 2013 at 2:05 pm

Not “stunningly”. See market monetarist commentary to understand the magnitude of the missed opportunity. On the Depression, the key insight is that when MP eased (going off the gold standard) rapid growth resumed. This was derailed in 37 by fiscal and monetary tightening.

They weren’t unemployable because of lack of skills. The problem then (and now) was lack of demand. That’s MP.

Easy money drives up all asset prices, but that doesn’t mean that no jobs are created – if MP was too tight. The correct variable to observe (and target) is nominal income!

Geoff Olynyk July 4, 2013 at 1:03 pm

This is the same reason why a carbon tax will be really difficult to get passed, despite it being the most efficient way to reduce carbon emissions and start dealing with climate change.

A revenue-neutral carbon tax (that is, increase the tax on carbon, lower the income or payroll tax) might be fine for people in New York City, but it will destroy Wyoming’s economy.

A nice little case study of how the politics of a revenue-neutral carbon tax work out in practice is what happened to Stéphane Dion and the federal Liberal party after they proposed such a tax – called the Green Shift – in Canada in 2008. It would have been revenue-neutral averaged across the country, but extremely negative for Alberta.

JWatts July 5, 2013 at 11:19 am

+1

gwern July 4, 2013 at 3:50 pm

> For the two relevant Robert Paul Thomas pieces (jstor) see here and here.

Here you go:

https://dl.dropboxusercontent.com/u/182368464/1965-thomas.pdf
https://dl.dropboxusercontent.com/u/182368464/1968-thomas.pdf

TallDave July 5, 2013 at 10:50 am

Reading A.S. now, thanks for recommendation Tyler, very worthwhile.

Eric Rasmusen July 5, 2013 at 11:01 am

If the impact of the Navigation Acts was 1% of GNP, I’d call that a big effect. On the macro level, little percentages add up to big money. Let me take a guess that taxes were 5% of GNP. In that case, the Navigation Acts were like a 1/5 increase in the amount of taxes, an increase for which the colonists got zero value. If Obama raised taxes 20% today and gave all the new revenue to the United Kingdom, Americans would not be happy, even though most of that increase would fall on rich Americans and most Americans are not rich, and even tho we are generally friendly to the UK.

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