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This version: December 2005
A hitherto unpublished benchmark estimates of real GDP (comprehensively defined) for the U.S. economy in the period 1790-1840 call into question two propositions about real per capital income growth and welfare in the first half-century of the young Republic. The remarkable feature about these new estimates is that while they do not alter the picture of a very gradual but sustained post-1789 acceleration of the long-term trend growth rate of per capita real out put to the 1 percent per annum level, they challenge long-held views about the sources growth and their economic welfare significance. For aggregate productivity and per capita real income to have been raised as a result of the relative the reallocation of workers toward commerce and industry, and away from agricultural sector, would have required --at very least � that average labor productivity was lower in farming than in the rest of the economy. For that kind of inter-sectoral shift to have been efficiency-enhancing and hence a source of total factor productivity gains, a substantial gap should have existed between the levels of marginal labor productivity in the agricultural and non-agricultural sectors. Neither supposition can be reconciled with the new estimates of real gross product originating per full time equivalent manhour in those two main segments of the antebellum economy.
Instead, it is found that average labor productivity in farming was high by comparison with urban-industrial industry and trade, and there was no gap in sectoral real hourly labor income (a proxy for marginal productivity) at the benchmark data where such calculations can most reliably be made. The rise of reproducible capital intensity in urban-industrial industry was a key driver in the relative shift of the workforce away from agriculture, as Alexander Hamilton and other contemporaries had argued. But it was also the case that per capita labor inputs were comparatively low in the agricultural sector as a whole, which was the other side of the relative high manhour productivity levels there. While the inter-sector shift away from agriculture thus contributed little if anything to the growth of real output per capita, it was a central force in the rising trend of labor input per capita throughout the antebellum period. Therefore, a substantial part of this early phase in the transition toward modern levels of the growth of per capita real income is seen to have entailed more hard work for the European settler population. Whether the process can be thought to have been part and parcel of the longer story of secular welfare improvements wrought by continuing transformations of technology and economic organisation is debatable. The case for such an interpretation must rest upon the argument that the comparative idleness of the rural American population in the early post-colonial period upon contemporary observers were wont to remark, had reflected no great preference for leisure versus goods, but a state of involuntary under-employment in which the opportunities for acquiring new goods through market-oriented production remained sharply constrained by the state of technology and the supply of savings.