Published by EH.Net (May 2022).

Lawrence H. Officer*. A New Balance of Payments for the United States,
1790–1919: International Movement of Free and Enslaved People, Funds, Goods
and Services*. New York: Palgrave Studies in American Economic History,
Palgrave Macmillan, 2021. xxxiii + 415 pp. $150 (hardcover or paper), ISBN
978-3-030-66098-7.

Reviewed for EH.Net by John Devereux, Department of Economics, Queens
College, City University of New York.



This book provides a definitive treatment of the U.S balance of payments
from 1790 to 1919. There is rich U.S tradition in this area. The 1960 NBER
volume *Trends in the American Economy in the Nineteenth Century* contained
two seminal articles on U.S external transactions. Douglas North covered
1790 to 1840, while Matthew Simon covered 1840 to 1916. Three years later,
Robert Lipsey produced his estimates of the U.S external terms of trade
after 1879. North went on to win the Nobel Prize in Economics. Lipsey had a
distinguished career at the NBER and Queens College. Simon, also of Queens
College, died in 1968. For the last 60 years their magisterial work has
formed the basis for what we know about U.S. external transactions over the
eighteenth and early twentieth centuries.

Much has changed since the early 1960’s. So it is time for a fresh look at
historical measures of the U.S balance of payments. Accordingly, Lawrence
Officer set out to revise North and Simon. To accomplish this, he gathered
the information, published and unpublished, that has appeared over the last
six decades. He also revisited earlier sources – including sources missed
by North and Simon. It has taken him ten years, but he has accomplished his
task in this book.

Officer has two objectives. The first is to put the U.S balance of payments
from 1790 to 1919, where the official series begin, on a consistent basis,
as previous work joined together series which were often incomplete and
which used different approaches and different measures. More importantly,
Officer expands coverage and improves the quality of the estimates. It
would take a much longer review to even list the improvements in existing
series. But the creation of new measures of the U.S net asset position and
better measures of service trade are particularly noteworthy. The effort
required to accomplish all of this is immense.  Consider the estimates for
tourism. This requires 82 series for ocean fares (p. 283). In addition,
Officer has to construct a new U.S CPI, and he generates measures of
domestic U.S passenger transportation for rail, stagecoaches, etc.

Officer’s thoroughness is shown by the fact that he revisits earlier work
by going back to the original sources and correcting errors of
transcription, etc. He accomplished all of this, it would appear, working
on his own without an army of research assistants. North, Simon, and Lipsey
benefitted greatly from the institutional support of the NBER. Alas, the
NBER no longer fills this function and Officer works on his own. The
resulting book is a model of scholarship – he presents all his results; he
outlines his methods and assumptions; he is modest and thoughtful; and he
is generous in his praise of earlier work. Indeed, he dedicates the book to
North and Simon. North is, of course, a towering figure. But Simon is a
forgotten scholar whose wonderful work deserves recognition. Officer’s
criticisms, when he makes them, are measured and fair.

The book is a major contribution to U.S economic history. To be sure, it
does not change the broad outlines of what we know about U.S trade and
foreign indebtedness before 1919 – North and Simon did their work well. But
Officer puts the estimates on a firmer basis. Take the external terms of
trade. Officer covers commodity and service trade for the entire period
where most work in economic history is for commodity trade. He improves
deflators and replaces the fixed weight price indices with a more
appropriate deflator. The result is that we now have an external terms of
trade series for the U.S from 1790 to now that is superior to the estimates
for other developed economies. Throughout, Officer either improves on
previous work or he provides new series.

Overall, the book is a monumental effort and its mastery of disparate
sources puts it on a par with classics such as Lebergott (1964). It will
surely stimulate further research. Officer’s early work on the dollar-pound
exchange rate is partly responsible for the literature on long run real
exchange rates which rehabilitated purchasing power parity (see Lothian and
Taylor, 1996). This book will have a similar impact. To provide one
instance, the improved measures of U.S foreign assets/liabilities will
facilitate work for economic history along the lines of Lane and
Milesi-Ferretti (2007).

The book is not an easy read. Officer starts off with a review of previous
estimates. Next, there is a long digression on the movement of people.
Following this, he outlines how he constructs each series, chapter by
chapter. Only at the end of the book does Officer draw the series together
and talk about his overall results. I would prefer that he start with the
big picture. Throughout, the writing is dense and assumes considerable
knowledge. To understand the basic issues with historical measures of U.S
external transactions, the reader is advised to consult North and Simon
before starting Officer. There are other difficulties. Officer provides
important new series, but the summary statistics do not indicate how they
differ from the old. Given the extensive reliance on interpolation, it
would also help if he gave some indication of possible error margins. All
in all, these are minor quibbles. A more serious problem is that some of
the most important series appear only as diagrams – including the external
terms of trade and the various price series. This is due to space
constraints, but it is unfortunate. The author, or the publisher, should
consider making all the series available in spreadsheet form on their
websites.



References

Lane, Philip R., and Gian Maria Milesi-Ferretti. (2007) \”The External
Wealth of Nations Mark II: Revised and Extended Estimates of Foreign Assets
and Liabilities, 1970–2004.\” *Journal of International Economics* 73:
223-250.

Lebergott, Stanley. (1964) *Manpower in Economic Growth: The American
Record Since 1800*. New York: McGraw-Hill.

Lipsey, Robert E. (1963) *Price and Quantity Trends in the Foreign Trade of
the United States*. Princeton: Princeton University Press for the National
Bureau of Economic Research.

Lothian, James R., and Mark P. Taylor. (1996) \”Real Exchange Rate
Behavior: The Recent Float from the Perspective of the Past Two
Centuries.\” *Journal of Political Economy* 104: 488-509.

North, Douglass C. (1960) \”The United States Balance of Payments,
1790-1860.\” In *NBER Conference on Research in Income and Wealth, Trends
in the American Economy in the Nineteenth Century, Studies in Income and
Wealth*, Vol. 24. Princeton: Princeton University Press for the NBER.

Simon, Matthew. (1960) \”The United States Balance of Payments, 1861-
1900.\” In *NBER Conference on Research in Income and Wealth, Trends in the
American Economy in the Nineteenth Century, Studies in Income and Wealth*,
Vol. 24, Princeton: Princeton University Press for the NBER.



John Devereux is professor of economics at Queens College, City University
of New York. His areas of research are International Economics and Economic
History.

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