Abstract
Many have noted the debate amongst Hamilton, Jefferson, and others on compensating original versus final US Revolutionary War debt holders upon federal assumption of state debts in 1790. However, to our knowledge the economics literature has not yet proposed a theoretical model of the argument. The purpose of this paper is to propose a simple household-level economic model to capture the most salient aspects of the debate, including the role of military impressment and the emergence of the Takings Clause of the US Constitution.
This is a preview of subscription content, log in via an institution to check access.
Similar content being viewed by others
Notes
See McConnell (2012, 275).
See Ferguson (1961, 57–66).
See Hall and Sargent (2014, 152).
See Hall and Sargent (2014, 151).
See Washington (1793).
See Edling (2007, 289–290, especially footnote 4). See also Beard (1915, 169–170, citing “The Complete Anas of Thomas Jefferson, 1791–1809”).
Madison (1790a, 444).
Madison (1790a, 446).
Hamilton (1789).
Ibid.
Ibid.
Ibid.
Ibid. It should be noted that the second statement is effectively a direct extension of the first statement; Hamilton merely separates the second statement by referring to different specific aspects of the greater principle defined in the first statement. It seems that Hamilton either felt that agriculture, manufacturing, and foreign trade were somehow fundamentally different than simply “trade”, or he was merely trying to increase the number of major benefits that would result from his plan.
Ibid.
See Irwin (2010, 89–90).
Ibid.
Madison (1790b, 9).
See Ferguson (1954, 39–40).
See Ferguson (1961, 155–173 and 180–186).
Ibid 272–284.
See Hall and Sargent (2014, 149).
See Hall and Sargent (2014, 151–156).
We have in mind here the characterization of impressment and indents in Ferguson (1954, 38), for instance.
We are grateful to an anonymous reviewer for calling our attention to the latter two points in this paragraph.
See Frey et al. (2004, 379–383, 391, 397)
While Wright (2008, 57) notes that impressment could or perhaps should be considered a form of taxation, and was only undertaken in the war years because other funding mechanisms had failed, our view is that comparison of these two public finance approaches would hinge on the degree to which impressments in lieu of taxes were uniformly applied across the population in order to fund the public good of national defense. Moreover, in that case, the government might have considered foregoing the issuance of IOUs to a subset of the population and instead considered impressing a more or less equal portion of goods and services from all households in lieu of taxes.
References
Beard, C. A. (1915). Economic origins of Jeffersonian democracy. New York: Free Press.
Boudreaux, D. J., Lipford, J., & Yandle, B. (1995). Regulatory takings and constitutional repair: The 1990’s property-rights rebellion. Constitutional Political Economy, 6, 171–190.
Chang, Y. (2012). Economic value or fair market value: What form of takings compensation is efficient? Supreme Court Economic Review, 20(1), 35–88.
Edling, M. M. (2007). “So immense a power in the affairs of war”: Alexander Hamilton and the restoration of public credit. The William and Mary Quarterly, Third Series, 64(2), 287–326.
Ferguson, E. J. (1954). Speculation in the revolutionary debt: The ownership of public securities in Maryland, 1790. Journal of Economic History, 14(1), 35–45.
Ferguson, E. J. (1961). The power of the purse: A history of American public finance, 1776–1790. Chapel Hill: University of North Carolina Press.
Freeman, A. M. (2003). The measurement of environmental and resource values: Theory and methods. Washington, DC: Resources for the Future Press.
Frey, B., Benz, M., & Stutzer, A. (2004). Procedural utility: Not only what, but also how matters. Journal of Institutional and Theoretical Economics, 160, 377–401.
Hall, G. J., & Sargent, T. J. (2014). Fiscal discrimination in three wars. Journal of Monetary Economics, 61, 148–166.
Hamilton, A. (1789). The first report on public credit. In H. C. Syrett (Ed.), The papers of Alexander Hamilton (vol. 6). New York: Columbia University Press; 1962.
Harrison, J. M., & Kreps, D. M. (1978). Speculative investor behavior in a stock market with heterogeneous expectations. Quarterly Journal of Economics, 92(2), 323–336.
Irwin, D. A. (2010). Revenue or reciprocity? Founding feuds over early US trade policy. In D. A. Irwin & R. Sylla (Eds.), Founding choices: American Economic Policy in the 1790s (pp. 89–120). Chicago: University of Chicago Press.
Lankford, R. (1988). Measuring welfare changes in settings with imposed quantities. Journal of Environmental Economics and Management, 15, 45–63.
Madison, J. (1790a). Madison’s February 11, 1790 speech in the first congress—Second session on public debt. In G. Hunt (Ed.), The writings of James Madison (vol. 5). New York: G.P Putnam’s Sons; 1904.
Madison, J. (1790b). Letter from Madison to Edmund Randolph on March 21, 1790. In G. Hunt (Ed.), The writings of James Madison (vol. 6). New York: G.P Putnam’s Sons; 1906.
McConnell, M. W. (2012). What would Hamilton do? Harvard Journal of Law and Public Policy, 35, 259–282.
Perkins, E. J. (1994). American public finance and financial services, 1700–1815. Columbus, OH: Ohio State Press University.
Sargent, T. (2012). Nobel lecture: United States then, Europe now. Journal of Political Economy, 120(1), 1–40.
Serkin, C. (2005). The meaning of value: Assessing just compensation for regulatory takings. Northwestern University Law Review, 99(2), 677–742.
Swanson, D. F., & Trout, A. P. (1992). Alexander Hamilton, conversion, and debt reduction. Explorations in Economic History, 29(4), 417–429.
Treanor, W. M. (1995). The original understanding of the Takings Clause and the political process. Columbia Law Review, 95(4), 782–887.
Washington, G. (1793). State of the Union Address. Washington, DC. http://founders.archives.gov/documents/Washington/05-14-02-0306. 15 Sept. 2015.
Wright, R. E. (2008). One nation under debt: Hamilton, Jefferson, and the history of what we owe. New York: McGraw Hill.
Acknowledgments
We are grateful to an anonymous referee for several insightful and encouraging suggestions. We also thank Professor Stan Engerman and Professor Michael McAvoy for very helpful ideas and encouragement at the start of this project, and session participants at the 2014 New York State Economics Association annual conference (particularly our discussant, Ranjit Dighe) for valuable comments and suggestions.
Author information
Authors and Affiliations
Corresponding author
Rights and permissions
About this article
Cite this article
Stone, J., Wagner, J. Fairness and efficiency in US Revolutionary War takings and post-war debt redemption. Const Polit Econ 27, 399–417 (2016). https://doi.org/10.1007/s10602-016-9219-5
Published:
Issue Date:
DOI: https://doi.org/10.1007/s10602-016-9219-5