economic forces in american history welcome!. property rights and us history: jamestown

Economic Forces in American History

Welcome!

Property Rights and US History: Jamestown

Introduction

Jamestown was one of the earliest settlements in Britain’s North American colonies.The colony failed not once, but twice, in 1607 and later in 1609.The majority of the colonists who died in each attempt succumbed to starvation.Survivors of the failed missions document the fact that there was plenty of food available.

Jamestown Witnesses

George Percy chronicled these events at the time, most of the settlers who died succumbed to famine.[1] Percy also describes the countryside as being full of different kinds of food. There were "turkey nests and many Egges," "Strawberries, Mulberries, Raspberries and Fruits unknown" and "great store of Deere both Red and Fallow."

[1] Tom Bethell, The Noblest Triumph, p. 33

Jamestown Witnesses

One eyewitness, after describing an act of cannibalism among the "poorer sorte" went on to lay blame on the colonists themselves: It were too vile to say, and scarce to be beleeved, what we endured: but the occasion was our own, for want of providence, industrie and government, and not the barenness and defect of the Countrie, as is generally supposed."[1]

[1] Ibid p. 34

Focus Question

The story of Jamestown raises a perplexing question: how could so many have starved to death in a land full of food? Winters in Virginia can be cold, but certainly no colder than many parts of Great Britain. Could hunting and fishing in the New World have been so different from what they'd experienced in England? Were the Indian tribes that fierce?

Jamestown - 1610Congratulations - you’ve made it to the New World!

First, you are an indentured servant. That means that you've agreed to work for seven years to pay the Virginia Company for your passage over here. It sounds like a long time, but compared to what you faced in England this is a major step up. The terms of your indenture make it very clear that whatever you create - crops, handiwork, even your ideas - belongs to the Virginia Company for the next seven years.

Jamestown - 1610Second, there are some company managers who came over on the boat with you. Their job is to see that you work hard enough to make the investment in your passage worth while for the company. They will tell you what work to do and when to do it.Third, you already can see that this new land is abundant with game and fish. The soil is very fertile and even the Indians (about whom you've been a little worried) aren't so numerous as you feared. Finally, the work you do is very important for the Virginia company. They expect you to do your very best for the period of your indenture.

Colonists– Your job is to do the

work given to you by the managers.

– The Company owns whatever you create and can reward you in any way it sees fit.

Managers (3 – 5)– Your job is to see

that colonists have what they need to do the work.

– You must also check the quality of the work.

– Finally, you reward the colonists according to the company policy

Work InstructionsYour supervisors will be bringing around your worksheets for each round of the simulation. They will give you a sheet of paper containing 15 boxes and your work will be to draw the following figure in each box.Draw as many as you want to in the time provided.

Production Results

Round 1

Round 2

Round 3

New Production RulesFrom now on, everything that a worker produces is his or hers. He or she can sell the work to the Virginia Company for an agreed upon rate. 1. The rate will be one piece of candy for every completed box.2. The colonist may decide not to sell the Virginia Company if he or she chooses.3. Colonists who produce no work will get no candy.4. Company managers will collect the work and record how much candy each colonist has earned. 5. Your teacher and / or the managers will distribute candy at the end of each round.

Production Results

Round 4

Round 5

Round 6

Debriefing Part 1

Why didn't the colonists work very hard in the early rounds? Were the colonists lazy? Were they stupid?What about the company managers - why weren't they able to motivate the colonists to work in the early rounds?What does that tell you about people, about human nature?

Debriefing Part II

What changed in the later rounds of the game?For the colonists, which part of the game did you like better? Why?For the company managers, which part of the game did you like better? Why?If you had to design your own colony, would you allow colonists to own their own land? Why or why not?

Key Concepts

Property Rights– The rules that

govern who owns what under what circumstances.

– The right to use, exclude others from using and transfer property as the owner sees fit.

Incentives– Rules or situations

to which people respond in predictable ways.

– Positive incentives allow individuals to maximize their profits while minimizing losses.

Indentured Servitude Simulation

Introduction

Indentured Servitude was the means for providing the British colonies with labor.Ship captains and labor brokers would create contracts with emigrants, then sell those contracts in the new world to land owners who needed workers.This simulation recreates that labor market.

At the beginning of the 18th Century, the typical indentured servant:

Was a 20 year-old male of English heritageCould not read or writeWas unskilledLived in PennsylvaniaServed an indenture of 4 years, 8 months

Why 4 years 8 months? Who set the length? And how?

Emigrants– Emigrant roles

come on yellow cards.

– Emigrants try to make a deal for the SHORTEST indenture period they can get.

– Emigrants get points for short contracts

Captains, Agents– Captain or Agent

roles come on blue cards.

– Captains or Agentstry to make a deal for the longest indenture they can get.

– Captains or Agents can earn profits with longer deals.

Emigrants– Only 1 deal per

round– No fibbing about

your worker classification number

– DO NOT TELL the captains your maximum time of indenture

Captains / Agents– Only 1 deal per

round– No fibbing about

where your ship is going

– DO NOT TELL the emigrants how much you can get for their contracts

– Captains/Agents must report deals

Round 1

You will have approximately three minutes to make a deal in this round. You may begin when your teacher says “Go.”

Round 2

Round 3

Debriefing QuestionsWhat was being sold in this market?Who were the buyers? Sellers?How would this market function if no one obeyed contracts?What did you notice about the general characteristics of the indenture market as we played more rounds?How was 4yrs 8months established as the term of indenture?Why is there a range of indenture contract lenghts?Who made money?

Predict…

Length of indenture as cost of passage to colonies declined…Length of indenture as economic conditions for laborers improved in England and Europe…Market for indentured servants as population grew…Market for indentured servants in South…

Key Concepts

Market Clearing Price

Supply & Demand

Labor Markets

Property Rights in US History: The Oklahoma

Land Rush

What would it be like if we could own things just

by claiming the on a first-come-first-served

basis?

Historical Background

The Land Rush of 1893 was the third in a series of land races created by the actions of the US Federal Government. These began in 1885, and continued in 1889.The Land Rush of 1893 was different, however, in one important way. Prior to the Federal Government opening the "Cherokee Strip" to settlement, the Cherokee Indians had leased the land to the members of the Cherokee Strip Live Stock Association.

More Historical Background

In 1888 the federal government stopped recognizing leases between the Cherokees and the ranchers. The next year Congress authorized purchasing the land for $1.25 an acre.[1] [1] Anderson & Hill, The Not So Wild Wild West, p. 172.

Congress then authorized the land rush of 1893, in which thousands of people came from all over the country to claim “free” land.

Oklahoma – 1893Congratulations! You've made it to the Cherokee Strip Land Rush here in Oklahoma Territory, 1893. That means that you traveled across the country just to get here and in a few minutes you’ll have a chance to get the “free land” that the government is “giving away.”Your family has brought all your resources – money, horses, tools, everything of value that you own. They’re loaded up in your wagon, ready to go the minute the cannon booms. For our purposes today those resources will be poker chips – take good care of them throughout the game. Succeeding in today's simulation is simple: just be the first family to get the deed on one of the remaining lots of land (the desks in the front of the room) and get as many of your chips there as possible. Candy prizes go to the families that successfully claim land.

Migrant Families– Groups of four or

five students– Objective: to get

land by being the first to pick up the sticky note/deed on a desk.

– To keep as many of your chips as possible.

Marshalls– 3 or 4 students for

a class of 35– Objective: to make

sure the rules for carrying chips are followed.

– Reward – candy for a job well done.

No one may cross the starting line until the command: “On your marks! Get Set! Go!”All family members must carry chips.Chips can only be carried on the backs of hands or on the tops of forearms. Chips must be visible to the marshals and the teacher at all times.Chips that fall off are lost. Fallen chips may not be picked up.Families must travel together - all four people in close proximity to each other.To claim a desk a family must get to the plot first, retrieve the sticky note, and stand around the plot before any other family has claimed it.After claiming the deed, a family must place on the “plot” of land the chips they successfully carried with them. (The teacher or a marshal will come by to count them.) Families who jump the gun (“Sooners”) will be removed from the game by the marshals and their chips will be confiscated.

On your marks…

Debriefing Questions 1

1. Prior to the race, who owned the land?

2. Once the race began, who owned it?3. After the race who owned the land?4. How many families got land?5. Why did so few families get land?6. For those families who got land, how

many chips were you able to get there with you?

Debriefing Questions 2

7. Why did so few chips get to the desks?

8. So for families that didn't get land, how many chips do you have left?

9. Was the land really free after all?10. Is there another, less wasteful

way the government could have privatized the land? What are some of the costs and benefits of doing this differently?

Focus Questions

Why did so many people have to lose so much to get “free” land being given away by the government?

Is there a better way for governments to allocate scarce resources such as land?

Debrief

The Oklahoma Land Rush is central to any history of the American WestIt is most often seen in a romantic light, with landless immigrants from all over the globe gaining property in the USFrom an economic point of view, however, this episode in American history shows us how wasteful we can be when we create the wrong incentives for people to follow.

Debrief

Once there is a “race” for resources people will lose track of even the things they need to survive.

Markets allow for orderly and efficient transfer of property – this is one of their strongest points!

Key Concepts

Property Rights– Individual vs

Governmental– Orderly transfer of

property rights

Incentives– Rewards and

punishments to which people respond predictably

Efficiency– Orderly transfer of

property rights

Institutions– Not buildings but

customs, ways in which an economy functions

Transaction Costs and Currency: “1808 Road Trip”

Background

Colonial & Revolutionary Periods:– No common currency (commodities,

Indian Wampum, foreign coins, variety of paper monies…)

1792: US adopts dollar as “official” currency… but dollars not issued by a standard source.

Background

1791: B.U.S. established1794: US Mint establishedStates CAN’T issue paper currency but they CAN create corporations by special franchise… 1793 - 1811: A large number of banks established by special franchise.

Background

1811, 86 of 88 banks are private, state-chartered banks empowered to issue their own currency…

1808 Road Trip

You are a lawyer / planter / businessman living in Richmond, Virginia in 1808. News of an excellent business opportunity has come your way. To take advantage of the opportunity, you must journey to Boston to meet with a group of investors.

1808 Road Trip

Carrying letters of credit from your banker and the little cash you've been able to accumulate, you leave home with a servant and two horses. To break up the long journey, you plan to stop for business and to visit relatives or renew old acquaintances in Baltimore, Philadelphia, and New York City on your way to and from Boston.

1808 Road Trip

In each city, you must secure one night's lodging at an Inn. Prices are posted outside the inn and typically include care and food for your horses and servant in the stable. In Boston, you must stay for 2 days to complete your business discussions.

1808 Road Trip

You are to return home by reversing the route you traveled to Boston—staying one night each in New York City, Philadelphia, and Baltimore.

If you successfully complete the journey before the end of the game, you will receive a prize.

RulesYou must visit the cities in proper geographical order.(No matter what kind of money is in your purse, you start & end in Virginia.)Except in Boston, you may purchase only one night's lodging at a time.Each time you successfully purchase a night's lodging, you must submit your lodging certificate to me. I will then mark your trip log for the city that matches your lodging certificate, and you can then continue on your way.

Each round of the game will last only 3-5 minutes. Start each successive round at the inn where you finished the previous round.Don't ask me how many rounds are in the game; I won't tell you.To earn the prize, you must complete the journey to Boston and back to your Virginia home before the game ends.

Round 2

Round 3

DebriefWere there advantages to the customers of using Bank of the United States notes?Were there advantages to the innkeepers of accepting dollars? Why would they accept dollars but not any of the other state currencies? Transaction costs are the costs involved in making an exchange or transaction. What were some of the transaction costs you encountered in this activity?

DebriefAre transaction costs included in the price of a night's lodging?Who bears the burden of the transaction costs – the traveler (buyer) or the innkeeper (seller)? Who reaps the benefits of the transaction costs - the buyer or the seller?Are transaction costs desirable or should we try to reduce them?

DebriefDoes having a common currency eliminate transaction costs? What is the impact of a common currency on transaction costs? On trade? What functions were served by the Bank of the United States, under the Constitution, adopting a single currency? Was this a benefit or a burden to the states and their citizens?Why might some states have been reluctant to make this change to a common currency?

Fractional Reserve Banking

Where does money come from?

Your role…

Bankers & Borrowers

First, borrowers can borrow only one time per round of the game. Second, no cash changes hands in this game. Borrowers get Loan Certificates rather than money.Third, successful borrowers must deposit their loan certificates into a bank other than the one which lent them the funds.

Round 1

Round 1 Debrief

How many borrowers were able to get funding in round 1?For those who were turned down, why did the bank say no? How many bankers met their goal of lending 80% of their assets?When those dollars were lent, where did they go?

Round 1 Debrief

Each bank started with $10,000 - Bankers do you have more than that now? How come?What is all that extra money doing in the economy?

Round 2

Successful Round 1 borrowers must deposit their funds in any bank other than the one where they borrowed. Bankers: Record deposits on the Bank Balance sheet, calculate how much you have in new deposits.Remember, you can only lend 80% of the new deposits. Begin Round 2!

Round 2 DebriefDid all borrowers make deposits into another bank? Borrowers how did you decide which bank to deposit in? How do people decide in real life? Did all bankers receive some new deposits? What do you think this symbolizes in the actual economy? Bankers, do you know how to figure out how much you have to lend in round 3? Borrowers, are you ready?

Round 3

Borrowers: Deposit moneyBankers: Recalculate deposits. Remember, you can lend 80% of your deposits.Ready, set, go!

Round 3 DebriefHow many borrowers were able to get funding in round 3?For those who were turned down, why did the bank say no? How many bankers met their goal of lending 80% of their assets?When those dollars were lent, where did they go? Each bank started with $10,000 - Bankers do you have more than that now? How come?What is all that extra money doing in the economy?

DebriefIn this activity the incentive for banks to make loans was bonus points/candy. What incentive do banks have for making loans in the real world? What incentive do people have for keeping their money in the bank?

We started with a money supply of only $50,000. We finished with a whole lot more than that. Where did the extra money come from?

What would the borrowers do with all the money they borrowed? Would their activity be helpful or harmful for an economy? How can you tell?

DebriefIn our simulation all of the loans were "good" loans because the borrowers all paid them back. What would happen in an economy where people stopped paying back their loans? What would banks be forced to do?

Our reserve requirement in this simulation was 20%. What would happen to the simulation if it were changed to 30%? How about if it were changed to only 10%?

Most economics textbooks say that banks "create" money. After our simulation do you agree? Why or why not?

A Question of Trust

Role: Oil Company Executive, 1875

As oil company executives, you will be making production decisions. The goal, of course, is to maximize profits for the company.

Rules & Procedures 1

The class will divide into six equally sized groups.Each group will be come an oil company and must:– Come up with a company name– Appoint a company treasurer

Each company/group will make decisions about how much oil to produce in each round of the game.

Rules and Procedures 2

Production decisions will be written on Production Decision Cards.Profit and loss will be computed using the Demand Forecast.– Profit and loss will reflect the production

of ALL 6 Companies combined.

The most profitable company will receive a prize at the end of the game.

Demand Forecast

Price Projected Demand

$125 1 – 6 Barrels

$100 7 – 13 Barrels

$75 14 – 19 Barrels

$50 20 – 26 Barrels

$30 27 – 32 Barrels

$25 33 – 40 Barrels

$20 41 – 50 Barrels

Debriefing 1

What strategies are being used to succeed in this simulation?What strategies didn’t work? Why?How did the profit motive act as an incentive? What behaviors did this encourage?How does the creation of a cartel affect consumers? (product availabilty? Price?)What happens in markets where collusion between producers is allowed?

Starting Over

An Industry Discussion…

Next Social/Business Dinner…

To Oil Company Executives:– As you know, cut throat competition has been

ruinous to us all.– If present trends continue, some of you will be

forced out of the market completely.– We are asking that you:

• Give your production decision cards to us in exchange for a certificate of trust.

• Allow us to make all decisions regarding the production and sale of the output of all your firms.

In return we will:– Guarantee to end the destructive practices

that threaten all our livelihoods.– Increase the efficiency of production and sale

of oil.– Thereby stabilizing the price, output and

profitability of our industry, and– Guarantee to you an equal share of the profits

Please discuss our offer among yourselves and let us know your decision as soon as possible.“The Family”

Debriefing 2

Why were the gentlemens agreements unsuccessful in our simulation?How did the trust form of organization solve problems for the businesses?Once the trust was established, whose interests were no longer protected?Many people have seen trusts as a failure of capitalism. In what way can they be seen as evidence of Adam Smith’s “invisible hand” of competition?

Key Concepts

The Law of Supply

Cartels and Collusion

Industrial Capitalism in the US

Competition in markets

Introduction

America’s Industrial Revolution gave rise to many of life’s conveniences: automobiles, factory jobs, refrigeration and the oil industry.Competition in the oil business was a constant problem for small producers, but one of the biggest producers found a way to solve the problem of competition.This simulation shows how difficult “cut-throat” competition can be and how one family in American history tried to overcome it.

The Industrial Revolution is a crucial chapter in any American history class. It’s normally taught as the narrative of improved production techniques, poor labor conditions, heroic reformers and villainous “robber barons”.This simulation is designed to have students experience the problem of competition between producers, and what happens when they try to solve that problem.

The Great Depression:

A Family’s Choices

Introduction

The Great Depression is a topic that is often taught in a macro sense: spiraling deflation leading to unemployment leading to government action, etc.This simulation is designed to give students a micro sense of the depression as they struggle to balance family budgets.

The Great Depression of the 1930s was part of a larger global financial crisis. Most Americans didn’t understand what caused the Depression, but all Americans had to deal with its effects in their daily lives.With unemployment at more than 25% and currency values rising, and banks no longer secure every family had to cut costs and increase revenues.

This simulation is based on six families, each with five members.Each family has a budget and a set of roles.In each role a family member brings news to the family that means the budget will have to be revised.

Activity Directions1. Review your family’s current income and expenditures.2. Select a role card from those distributed to your family discussion group.3. Beginning with the youngest family member, proceed, in round robin fashion, to report to the family the situations described on the role cards.4. Discuss as a family the changes you will make to deal with the situations described in the role cards.5. When you’ve reached consensus, enter the decisions on the family budget handout. Be prepared to present your changes and explain them to the class.

DiscussionDid your quality of life change?

Which changes were greater… changes in income or changes in expenditure?

Over which did you feel you had more control (income or expenditure)? Why?

If your families are representative, what has happened to overall level of income in Butcherville? Expenditure?

Ripple EffectReview your family background and budget sheets to find the names of specific people and businesses that are directly impacted by the income and expenditure decisions your family made in response to the changes described in your role cards.Create a ripple diagram showing the effects of YOUR family’s budget on others in your town.

Ripple EffectPlace your family in the center of the diagram (as if you were a stone thrown into the water).On the 1st wave of ripples, write the names of people directly impacted by your choices.

Next to each name indicate how they were affected, using I for “income” or E for “expenditure” and for increase, or for decrease.On successive waves, indicate others affected.

DiscussionHow did one families decision to reduce consumption affect others in Butcherville?Suggest a generalization that describes the relationship between income and expenditure among the members of an economy.Suppose that families in Butcherville choose to use their savings rather than reduce consumption. Does that mean that no one’s income will be affected?

In hard economic times, people try to protect themselves from additional hardship by cutting back on consumption. Why would such prudent measures for individuals make people worse off overall during the Great Depression?

Discussion

What happens when one family economizes to adapt to hard times?

What happens when every family economizes to adapt to hard times?

What does this activity suggest about our current financial crisis? What should people do? Why?

Key Concepts

Paradox of Thrift

Budgets

Choice

Scarcity

Opportunity Cost

Circular Flow of income & expenditure

The Opportunity Cost of Staying Home

Key Concepts

Opportunity Cost

Changing Roles of Women in 20th Century US

Marginal Profit

Labor Markets

Introduction

The roles of women in the America’s economic history is fascinating but almost never taught to high school students.For many reasons women started to join the official labor force in ever increasing numbers as the 20th century went on.From the economic point of view their opportunity costs changed.This simulation is designed to portray that opportunity cost calculation.

Focus Question

When you choose to do something, to pursue a goal, what is the real cost?

Spouses– A, B and C– Each spouse creates a

certain number of satisfaction points

– Satisfaction points have a market value:

• $1 = 1 sp

– Goal for spouses is to maximize their Satisfaction points by either taking a job or choosing not to.

Employers– Each employer needs to

hire workers for each round of the game.

– Employers know how much profit each additional worker will give them at the prevailing wage.

– Employers bargain with spouses individually each round

– Goal: maximize profits

Satisfaction Points

Satisfaction points ≠ WealthLevel of satisfaction affected by things such as:– Family size– Numbers & ages of children– Working spouse’s job qualities and

income– Family values– Personalities

Satisfaction Points

Could Satisfaction points be provided for the family in another way?– Hiring a sitter or house cleaner– Accepting that house won’t be as clean– Store-purchased bread instead of homemade.

Not all substitutes are perfect substitutes. Some may provide more satisfaction… some less.Doing without IS a substitute (even if not very satisfactory)

Satisfaction Points

In this activity, household spouses can earn satisfaction points in 2 ways:– Stay home and perform household tasks

(cleaning, meal prep, child care, gardening, volunteer work, etc.)

– Purchase “satisfaction points” with money earned by working

$1 = 1 Satisfaction Point

GOAL: Have more satisfaction points than you started with.

Number of satisfaction points on your role card DOES NOT affect your ability to be successful…Extra points represent a variety of different “improvements” in your families’ lives. (better food, nicer clothes, saving for college, enjoying work, happiness from staying home…)

GOAL: Have more satisfaction points than you started with.

Extra Satisfaction points earned can be used to shop in the classroom store.Ex: Start with 20 pts each round. Need MORE than 60 pts after 3 rounds to shop in store. More pts = more stuff!

Round 1

Results

Round Spouses w/ jobs

Spouse w/out jobs

Debriefing 1After this round, how many spouses took jobs?What was your opportunity cost of working?For those who didn’t take jobs, why not?What was the opportunity cost of staying home?For employers, why didn’t you hire more people?Are we ready for the next round?

Round 2

Results

Spouse w/out jobs

Debriefing 2

Anyone choose to work who stayed home in round 1? Why?How did the opportunity cost of staying home change from round 1 to round 2?Are we ready for the next round?

Round 3

New Role Cards….

Results

Spouse w/out jobs

Debriefing 3Spouses – what had to change in order for you to take a job in the three rounds of the game? Why?Employers what had to change in order for you to hire more workers in each round?Do women’s choices become easier or harder as their alternatives increase? What eras of US history are portrayed in each round of the game?

economic forces in american history welcome!. property rights and us history: jamestown

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