Research in Economic History: Volume 33

It is generally believed that the Smoot–Hawley Tariff Act (SHTA) of 1930 was an electoral response on the part of the Republican Party to Midwestern farmers’ concerns in the 1928 general election which via the legislative process (pork-barreling and log-rolling) was transformed into a generalized upwards tariff revision. There are, however, problems with this view, not the least of which is the fact that the farmers themselves were well aware of the fact that higher tariffs would not improve their lot, and hence favored the price support/equalization measures found in the Haugen–McNary Farm Relief Bill. This paper presents an alternative explanation. Specifically, it is argued that the SHTA had its origins in manufacturing states where the demand for a comprehensive upward revision of tariffs was transformed via the electoral process – and not the legislative process – into an omnibus upward tariff revision that included agriculture. The omnibus nature of the bill, it is argued, was intended as both (i) an electoral strategy and (ii) a hedge against near-certain revolt in rural America over anticipated higher prices for manufactures. We show that while successful electorally (i.e., in the 1928 presidential election), the Smoot–Hawley Tariff Bill fell apart in the legislature in the summer of 1929 when 13 Insurgent Republicans broke with the party to vote with the Democrats to lower tariffs on manufactures.

We present a continuous time series on first cabin passenger fares for ocean travel from New York to the British Isles covering nearly a century of time. We discuss the conceptual and empirical difficulties of constructing such a time series, and examine the reasons for differences between the behavior of advertised fares and those based on passenger revenues. We find that while there are conceptual differences between these two measurements, as well as differences in the average values, the two generally moved in parallel, which means that the advertised fare series can serve as a reasonable proxy for movement of the revenue-based fares. We also find that advertised fares declined over time, roughly paralleling the drop in freight rates for US bulk exports, until around 1890, but thereafter increased while freight rates continued to decline. We propose several hypotheses for this divergent behavior and suggest lines of future research.

At the time they occurred, the savings and loan insolvencies were considered the worst financial crisis since the Great Depression. Contrary to what was then believed, and in sharp contrast with 2007–2009, they in fact had little macroeconomic significance. Savings and Loan (S&L) remediation cost between 2 percent and 3 percent of Gross Domestic Product (GDP), whereas the Troubled Asset Relief Program (TARP) and the conservatorships of Fannie and Freddie actually made money for the US Treasury. But the direct cost of government remediation is largely irrelevant in judging macro significance. What matters is the cumulative output loss associated with and plausibly caused by failing financial institutions. I estimate output losses for 1981–1984, 1991–1998, and 2007–2026 (the latter utilizing forecasts and projections along with actual data through 2015) and, for a final comparison, 1929–1941. The losses associated with 2007–2009 have been truly disastrous – in the same order of magnitude as the Great Depression. The S&L failures were, in contrast, inconsequential. Macroeconomists and policy makers should reserve the word crisis for financial disturbances that threaten substantial damage to the real economy, and continue efforts to identify in advance financial institutions which are systemically important (SIFI), and those which are not.

Inefficiencies in the fiscal and monetary systems of the Ottoman Empire led to a higher debt burden over time and the bankruptcy for the Ottoman state in 1875. To deal with these inefficiencies, reforms were implemented: supervisory organizations were established and the gold standard was adopted. How did investors at the Istanbul Bourse view these reforms? We manually collected data on the price of Ottoman government bonds on the Bourse from 1873 to 1883. Using the generalized autoregressive conditional heteroscedasticity (GARCH) methodology, we identify short-run and permanent changes in volatility of bond returns subsequent to the reforms. Our results suggest investors responded positively, by accepting lower yield premia, to adoption of the gold standard, and foundation of the Ottoman Public Debt Administration which had European sponsors, but did not respond positively to reforms that relied on purely local institutions.

We document how inflation expectations evolved in the United States during the fall of 1933 using narrative evidence from historical news accounts and the forecasts of contemporary business analysts. We find that inflation expectations, after rising substantially during the spring of 1933, moderated in the fall in response to mixed messages from the Roosevelt Administration. The narrative accounts and our econometric model connect the dramatic swings in output growth in 1933 – the rapid recovery in the spring and the setback in the fall – to these sudden movements in inflation expectations.