Unequal Gains: American Growth and Inequality Since 1700 by Peter H. Lindert and Jeffrey G. Williamson (review)

Unequal Gains: American Growth and Inequality Since 1700aims to rewrite several important chapters in American economic history. Peter H. Lindert, a professor at the University of California, Davis, and Jeffrey G. Williamson, a professor at Harvard University, have fruitfully collaborated for almost four decades and are among the most respected economic historians alive today.

Their main new findings span the colonial era through the early twenty-first century. They establish that the colonial United States had a low level of economic inequality and that Americans achieved the highest level of income per person in the world as early as the late seventeenth century, although they lost and regained the lead in later years. While the colonial era saw little growth in per capita income, coastal regions underwent intensive economic growth, and more people moved to the interior where standards of living were good. The South did especially well during the colonial period, and there was "a remarkable lack of poor southern whites, defined as those of menial trades or having zero tax-assessable wealth" (p. 35). The American Revolution, however, devastated the economy, and there was a "truly huge economic disaster between 1774 and 1790" in which incomes fell by a percentage that "may have been 'equal to the early years of the Great Depression'" (p. 86). Sustained economic growth in the United States began as early as 1790. Between 1800 and 1860 the country's per capita incomes increased at more than 1 percent per year, but there was also a massive, "broadly based" increase in income inequality (p. 11).

The second half of the book provides fewer new findings but completes the story with several key events. A "Great Leveling" occurred between the 1910s and the 1970s as the United States achieved historically low levels of economic inequality, which Lindert and Williamson attribute to political shifts and wars, slower labor force growth, a rapid rise in education levels, deceleration in automation, rising trade barriers, and tight financial regulation (p. 11). The rise in American inequality since the 1970s was due to the reversal of factors that previously reduced inequality. (Oddly, major demographic trends surrounding changes in familial structures and single-parent households during this period are not mentioned.) The authors conclude that the waxing and waning of inequality amid sometimes slow and other times rapid economic growth shows that grand theories that attempt to explain historical trends in inequality, such as the theory Thomas Piketty advocates in Capital in the Twenty-First Century (Cambridge, Mass., 2014), cannot tell us the whole story. Instead, it is crucial to look at the nitty-gritty details of each period to understand historical trends.

Lindert and Williamson's new findings from the earlier period are built primarily on their construction of income estimates. They built "social tables" using occupational earnings, property incomes, and (before emancipation) slaves' retained earnings for different benchmark years, including 1774, 1800, 1850, 1860, and 1870 (p. xv). Whether scholars accept the authors' key findings will hinge on how much faith they place in these social tables. Lindert and Williamson recognize that not everyone will be convinced by the "courageous" assumptions they made in piecing these tables together (p. xvi). "These assumptions and the resulting allocations can certainly be challenged," as they were often developed in a "data-thin environment" (pp. 23, 75). Some may consider the authors' assumptions foolhardy because their methods involve using income averages for occupations, even though incomes vary within each occupation and the change in that variance over time is not always known. Also, the price data they use generally assumes that prices are uniform throughout the economy, which is worrisome. Despite these caveats, I expect textbooks will soon use two key figures from the volume, which...