Brief: Which Western countries care most about preserving the media?

A recent NYT article reviews a German study of how willing people in various countries are to pay for "online content" -- news reporting, videos, songs, etc. In the German-language PDF linked to above, a table shows how people in the countries studied describe their preferences for getting online content. The columns read: free with ads, free with no ads, pay with no ads, pay with ads, and none of above. You can probably figure out what the country names are.

There's a fair amount of variation in how much of the population is willing to pay at all, or conditional on paying or not paying, whether they'll accept advertising. To see what explains this, I've excluded people who answered "none of the above," leaving only those who expressed an opinion. In the table below, I've lumped the two "free" groups together and the two "pay" groups together. I've also calculated a "delusional" index, which answers the question, "Of those who want free content, what percent expect it to not even have advertising?" Obviously someone has to pay for news articles to get written, and some free-preferers recognize that advertising is the only viable alternative to not paying for typical media products yourself. So, those who answer "free, no ads" are expecting media producers to behave like charities.

The table also shows GDP (PPP) per capita, on the hunch that richer countries will be more willing to pay for news, videos, and so on. In economics jargon, this online content is a "normal good" that sees a rise in demand when a population gets wealthier (an "income effect" pushes the demand curve up). The table is ordered from most to least willing to pay.

Country	GDP / cap	% Pay	Delusional
Sweden	37,334	25	20
Netherlands	40,558	20	36
Great Britain	36,358	19	43
USA	47,440	18	27
Belgium	36,416	15	33
Italy	30,631	15	46
Greece	30,681	13	27
Bulgaria	12,322	12	41
Czech	25,118	11	56
Germany	35,539	10	56
Turkey	13,139	9	54
Romania	12,600	9	48
France	34,205	8	56
Portugal	22,232	8	52
Hungary	19,553	8	52
Spain	30,589	6	61
Poland	17,537	5	57

It sure looks like wealth plays a key role, so let's look at how GDP relates to both willingness to pay and how delusional the free-preferers are:


Since the willingness to pay and the delusional index cannot vary outside of the range [0,1], I use the Spearman rank correlation instead of the Pearson correlation. The correlation between GDP and the percent willing to pay is +0.67 (two-tailed p less than 0.01). Between GDP and the delusional index, it is -0.49 (two-tailed p = 0.05). People in richer countries are more willing to pay, and they are less deluded about where stuff comes from -- that is, typically not from charities.

The surprises are worth looking at. At the top, we see mostly Anglo and Nordic countries, and at the bottom the more southern and eastern parts of Europe. However, France ranks pretty low, and Germany doesn't do much better, even though we Americans think of those countries as having more sophisticated media tastes, and as treasuring the institutions of the media -- Gutenberg in Germany, for example. We also think of ourselves as much more bratty when it comes to the media -- that because our sophistication level is so low, we're only a tiny bit willing to pay, and any more than that we'll junk the news in favor of some other cheap form of entertainment.

It looks like the ones that have more pro-market views are more supportive of paying for online content. The French and Germans may like the idea of keeping the media alive and thriving, but Americans are more willing to do what it takes to ensure that happens.

Brief: When statesmen weren't elderly

A book that I'm reading casually mentioned that the English politician Bolingbroke became Secretary at War in 1704 -- at age 26. When something seems like it's from another world, it probably reflects the massive changes that the West has seen since making the transition to a society characterized by open entry and competition in both the economic and political spheres. To check this, I've plotted over time how old the entering British Secretary at War was (or whatever new title he may have had, such as Secretary of State for Defence). Here are the results:


Sure enough, up through the first quarter of the 18th C., the Secretary at War's age hovers around 30. By the end of the century, his age has moved to the upper 30s and 40s. During the 19th C. there is more variance, with a handful of Secretaries in their early 30s, but the trend is still upward into the 40s and 50s. After 1900, the youngest has been 38, the oldest 73, with the average at 52. The men with heavy war responsibilities are about 20 years older in post-industrial than in pre-industrial times.

One reason may be that everyone started living longer with industrialization, not just the statesmen. But when you think about it, that cannot explain things. Presumably the 17th C. counterparts of today's lead singers of a rock band were also in their 20s. Elite athletes were likely also in their 20s, as they are today. If there were supermodels back then, you can bet they would have been in their 20s as well. Instead, there has been a shift in what type of people are considered fit for war secretary, which in turn reflects a change in the job description itself.

Violence and Social Orders, the book I'm reading, posits a framework for understanding history through the lens of controlling violence. In a primitive social order, such as those of hunter-gatherers, there is continual violence, no state, and mostly no social organizations beyond kin networks.

The limited access order (or "natural state") controls violence by using the state to create rents for elite members of a dominant coalition. Each elite gets his own piece of turf to extract rents from, and each elite respects the turf of the others because otherwise violence will break out, and that disorder would destroy the rent-creation. To make sure that the rents are sufficient to persuade elite members to refrain from violence, access to the elite is restricted -- if it were open, lots of people would pour in and shrink the amount of the rents going to each person. Still, the shadow of violence always looms over the society, since the means of violence are spread out over the entire elite -- not monopolized by the state -- and they only refrain as long as no one trespasses against them. The threat is always there.

Open access orders are the ones we live in today, where there is political control of the military, the state is used to provide public goods for the masses rather than private rents for the elites, and where the economically powerful earn their money through profits -- doing something productive -- rather than parasitizing rents from the peasants under their control. Violence is rare because the state monopolizes the legitimate use of violence, rather than every elite member being a violence specialist himself or closely allied with one. Elites compete on the basis of the price and quality of the goods and services they provide -- not based on who can defeat whom in a violent battle.

My guess for why open access orders have older statesmen is that since the shadow of violence has been largely removed, you don't need people running military affairs who are itching to pick up arms and go kick some ass. Being a hormone-crazed young person is great in a natural state -- your hair-trigger emotions are suited to a world where you always have to be prepared to fight, and your choleric temper provides a credible threat to would-be trespassers during peacetime. For example, Alexander the Great became King of Macedon at 20 and had conquered much of the known world by his death at 32.

But in open access orders, violence has been stripped from the broad elite and concentrated in the state, and civil war -- that is, intra-elite war -- is rare. So, too, are elite uprisings against the state -- before, these resulted from elites losing their rents and going after the people who were supposed to be providing them. So in these societies hot-headed young people are only going to threaten the peace. The elites are no longer constantly prepared to battle each other, so we only require a calm person to make sure everyone continues to get along. A 26 year-old in charge of the army, by contrast, would grow bored with peace so quickly that he'd want to stir things up "so we at least have something to do."

It's funny that we worry today about how to control young males' violent impulses, which threaten the peace. Only 300 years ago, we would have been grateful to have a young violent male in our social circle -- he would've been extracting rents from us, but at least we'd have someone to protect us from all those other specialists in violence. We truly live in a different world.

Brief: How does racial ideology vary by income level for blacks and whites?

One school of thought says that ideology is something that the poor are more likely than the rich to rely on -- e.g., Marx's view that religion is the opiate of the masses -- while another holds that ideology is costly, so that the wealthier you are the more you can indulge in it. Let's see how this works out with the ideology of racial consciousness among blacks and whites as a function of income.

The General Social Survey asks how important ethnic group membership is to your sense of who you are. Here is how whites (1st) and blacks (2nd) respond, split up into the upper, middle, and lower thirds of the black income distribution:




As whites become richer, they rely less and less on their ethnicity to define themselves, while the opposite is true for blacks. Blacks of all income groups are more likely than whites to be highly racially conscious (i.e. by answering "very important"), but this gap widens as we move up the income scale -- from about 30 percentage points among the poorest third to over 50 percentage points among the richest third. There is greater race polarization among the rich than among the poor, which rules in favor of the idea that ideology is costly and so that the rich consume more of it than the poor. (Wealthy whites do not consume pro-white ideology but rather an ideological form of cosmopolitanism.)

This result is similar to the Republican - Democrat gap that widens as you move up the income scale, as shown by Andrew Gelman and colleagues in Red State, Blue State, Rich State, Poor State. They come to the same conclusion that arguing over Starbucks, gas-guzzling SUVs, etc., is due to post-materialism -- something you indulge in after your basic financial needs are well taken care of.

Another question asks if you believe harmony in the US is best achieved by down playing or ignoring racial differences. This is the Rodney King view, the opposite of the Malcolm X view. Here are the results for whites (1st) and blacks (2nd):



Whites feel virtually the same across income groups, while richer blacks are less likely to agree with the Rodney King view and more likely to stand strongly against it. Again we see greater race polarization as we look at higher-earning people, which reinforces the post-materialist take on how and why ideology varies across income levels.

GSS variables used: ethimp, ethignor, race, realinc

Brief: Generational views of communism

On the 20th anniversary of the fall of the Berlin Wall, let's take a look at how the various generations viewed communism.

The General Social Survey asked a question from the early 1970s through the mid-1990s about your view of communism. I've restricted the respondents to those between the ages of 18 and 30 to make sure that we're looking at those most prone to idealistic foolishness of one stripe or another. The generations I've chosen are earlier Baby Boomers, later Baby Boomers, the disco-punk generation (perhaps Second Silent Generation is better), earlier Generation X-ers, and later Generation X-ers. Here are the results:


I knew beforehand that those born between the two most recent loudmouth generations (Boomers and X-ers) would be the least sympathetic to commies because they came of age during a decidedly non-ideological period -- roughly the late '70s and early '80s, in contrast to the highly ideological Sixties and early '90s that the other two generations grew up during. Young people during the social hysterias felt compelled to embrace the larger world in order to change it for the better, while young people during a period of relative social calm felt like telling the larger world to go get a life of its own, leave us alone, and let us have fun.

I'm putting together a more detailed post about generational differences in voting patterns across the years, so stay tuned.

Brief: Too smart for their own good or just showing off?

Returning to the theme of whether people favor policies that benefit their narrow self-interests, let's have a quick look at who says the government should provide a minimum income. The self-interest view says that as people make more money, they should be less likely to favor such a policy -- they earn too much to qualify, and they'd pay for it through higher taxes. Indeed, that's just what the GSS shows, whether we look at real income or self-described class. Here are the results, where red is support, blue is neutral, and green is reject:



But what about support for the policy based on your brains? The self-interest view predicts the same pattern as above -- college graduates are very unlikely to qualify, yet they'd have to pay higher taxes to fund it. And in the GSS, real income increases steadily as your intelligence increases (data not shown here), so we'd expect smarter people -- who are also wealthier people -- to want the policy less. That's mostly true, except at the very high end:



Support for a minimum income policy decreases as you poll smarter and smarter people -- until you reach the high end, who get 9 or 10 out of 10 questions correct on a makeshift IQ test. Similarly, support erodes as you poll more and more educated people -- until you reach the high end, who have more than 2 years of post-graduate study (i.e., not just a masters but a doctorate).

You might think that overly brainy or overly educated people make less than those just below them -- think of the English PhD who works at Starbucks -- but remember that using this measure of IQ, the upper end makes more money than those just below them. You might also think that the high end has simply been exposed to more silly ideas -- again, think of the English PhD who had to read some Marxist stuff for his theory classes -- but why doesn't this hold for those with 1-2 years of college, 3-4 years of college, or who hold a masters? Surely they've been more exposed to silly ideas than those just below them, and yet they are less and less likely to support the policy. And remember that the reversal also shows up in IQ, which just measures how smart you are, rather than how much time you've spent listening to professors.

So perhaps there is something to the idea of people at the upper end of the intelligence scale being "too smart for their own good." Minimum income policies will keep more poor and low-skilled people out of work because an artificially high price (i.e., a wage or salary higher than what employers and workers would agree to) means that employers won't offer as many jobs as they would if the wages were somewhat lower. As people have more intelligence to see this -- or at least sense it intuitively -- support for the policy generally drops off. But maybe being at the upper end makes people arrogant -- "Well, that's the obvious answer, so it can't be right. There has to be a more complicated and different answer!"

Alternatively, the high end could be trying to signal their braininess -- "I'm so smart that I can hold all sorts of ridiculous views and not suffer any consequences." Why don't people on the high end of income and class try to signal their status in the same way? Because income and class are more acquired traits, whereas differences in intelligence in modern societies mostly reflect different genetic endowments. If you're trying to signal how good your genes are, the trait that you claim to be so high on -- "I'm so X that I can afford to..." -- would have to show a strong genetic influence.

These data don't allow us to decide between the two main explanations, but they do rule out the strong version of the self-interest view.

GSS variables used: govminc, realinc, class, educ, wordsum

Diversity in aesthetic tastes over the last 130 years: Evidence from names

Updated

Virginia Postrel argues in The Substance of Style that we have entered a new aesthetic age, where design objects are available to a mass audience, where those consumers no longer consider just the price but also the look and feel of the stuff they buy, and so where producers don't compete with each other only on price but also on how aesthetically pleasing their products are. (Think of how many stylish toilet brushes you can buy at Wal-Mart or Target.)

She wrote this in 2003 and claims it began sometime in the mid-to-late 1990s. That trend seemed to take off even more during the recent financial euphoria, and although it's surely taking a beating during the recession, it'll be back once we feel safe spending again.

One thing I kept asking myself was, "Is this really so new?" As a general rule, you should be skeptical of all stories about how we're "entering a new age." After all, what about the 1920s and '30s, which Postrel admits could have been a previous age of aesthetics? She counters that design wasn't enjoyed by nearly as large a fraction of the population as it is today, and that the range of products that were designed with aesthetics in mind also was more limited than today. What about the more mass-market design of the 1950s and '60s? She says that the choices available weren't nearly as varied and driven by customization as the ones we have today.

I've decided to take a different approach by looking at baby names, a program pioneered by Stanley Lieberson to investigate fashions (summarized in his excellent book A Matter of Taste). Unlike toilet brushes, cars, or paintings, names you give your baby don't cost money. They carry non-monetary costs -- you wouldn't name your kid Adolf, and it's not because you'd have to plunk down big bucks to register that name. Still, they are a lot closer to the ideal test of someone's desires where you ask them to "pretend that price isn't an issue."

Postrel sees the choice to endow an object with aesthetic qualities as "making it special." That has two consequences: it will tend to create turnover, as people start to make things special by making them different from what they were like yesterday; and it will tend to make things more diverse, as individuals try to look different from each other today. Lieberson has already provided graphs from many European countries on the turnover in names over time, going back centuries. The take-home message is that roughly before the industrial era, there was little to no turnover in names. (He measures turnover as the number of names in this year's Top 10 that were not present in last year's Top 10.) With industrialization, the fashion in names took off. The turnover rate really shoots up sometime in the mid-20th C., but it's not clear if it's something different or just the rapid-growth phase of a single, sustained exponential increase.

That's not too surprising, and it underscores the importance of not believing in "new era" stories. To a first approximation, there was the transition to agriculture, and then the transition to industrial capitalism -- and that's it. That's basically all we see in Lieberson's turnover data -- there is a pre-industrial stage with no turnover and an industrial stage with high turnover, and that's about all.

What about the diversity of names? Even if there were no turnover in the Top 10 names, we could still see people introducing more and more new names in order to make their children special. Recall that a big part of Postrel's story is that in our new aesthetic age, we really value standing out from others at the same point in time, not simply moving from one universal style to another over time. Lieberson does have some graphs on how highly concentrated names are, but the data are much more regional than national, they only cover some of the 20th C (although a decent chunk of it), and the measure isn't as precise as it could be. (He uses the percent of all names that are held by the Top 20 names, as well as the percent of all names that are given to only one person.) The rough pattern is that diversity of names seems somewhat static from roughly 1920 through either 1945 or 1960, and by no later than 1960 we see a tendency toward greater diversity.

To solve these problems somewhat, I turn to the Social Security Administration's archive of popular baby names. These are national data, so the sample size is a lot larger than Lieberson's regional data, and the regional differences are smoothed out. They also cover more time -- 1880 to 2008. And I've used a more standard measure of variation when the data are not quantitative (like names), as well as develop a measure of my own that is more flexible.

The standard measure I use is one of many ways to measure "qualitative variation," where the data are not numbers. It is thus impossible to compute how far a given datum deviates from the mean, and thus impossible to compute the variance. For data that are numbers -- height, IQ, etc. -- the variance tells us how spread out vs. how similar the values are. In the Appendix, I discuss what the two measures I use are, the standard one and my own. The only thing you need to know is that bigger values mean greater diversity.

With that out of the way, let's see what the historical pattern of conformity vs. diversity has been in aesthetic tastes. There are separate data for males and females, so I also show what the female - male gap has been:




First, note that the female line is always above the male line, a pattern that shows up in Lieberson's turnover data too. Parents give greater fashionableness to their daughters' names, and are less enthusiastic about their sons standing out.

There certainly has been a sharp increase during the past generation, starting around 1983 for boys and 1987 for girls. But that's nothing new. There was a more modest upturn from just after WWII until the early-mid 1980s. Moreover, there was another pronounced increase going back at least to 1880 (and probably before -- remember that the turnover data tracked industrialization), which fizzled out around 1905 for girls and 1910 for boys. From then until the post-WWII era, diversity actually stagnated or slightly declined. This trend obviously goes against what we'd expect from our view of the 1920s and '30s as a previous age of aesthetics. At least in the sense of "making special" as distinguishing things from one another in the same time period, the turn-of-the-century through the post-WWII era was conformist compared to the dizzying changes of the earlier industrializing stage or the turbulence that would follow.

In looking at the female - male gap, we are looking at another facet of culture -- namely, how egalitarian-minded people were with respect to sex (and perhaps in general). We see a narrowing of the gap from at least as far back as 1880 until 1915. From then until 1969, we see a general widening of the gap, although there are noticeable egalitarian dips during the depth of the Great Depression in the early-mid 1930s and during WWII. From 1915 until WWII, the widening gap is caused by boys receiving more similar names, with little change among girls. To me, that suggests traditionalism -- don't make girls' names any more fashionable, and drive boys names away from being fashion symbols.

From WWII to 1969, though -- i.e., during the Baby Boom -- the widening gap is caused by girls receiving more diverse names at a faster rate than boys are. This is a compromise between tradition and change -- clearly it's a break with the traditional values by making boys names more subject to fashion, but you don't notice it so much because girls' names are becoming even more subject to fashion.

Once the earliest Baby Boomers (born around 1945) reach child-bearing age (around 25), or in 1970, we see a steady reversal. Boomers wanted to equalize the outcomes of their own babies, and this was mostly due to slowing down the fashionableness of girls' names. That's what they tried elsewhere -- recognizing that females are more compliant than males, you should force females to be more like males rather than vice versa. Boomers were more likely to favor "bring your daughter to work day" than "give your son a dollhouse to play with."

There is a brief widening of the gap from 1987 to 1996, and this corresponds to the generation I've elsewhere called the disco-punk generation. They are too young to be canonical Boomers and too old to be Generation X-ers. I've estimated that they were born between about 1958 and 1964, so the typical member born in the early '60s would have started having kids in the late 1980s. This generation is very different from Boomers and X-ers, not having been ideological or attention-whoring when they were coming of age around 1980.

However, once the prototypical Gen X-er, born in 1971, starts having kids in 1997, the gap starts to close again. Remember, they were the ones who made Third Wave feminism a success.

So, the female - male gap shows us that our aesthetic preferences reflect larger social and cultural changes, such as how ideological we are about sex equality.

Even the overall data, which don't show such sensitivity to smaller-scale social changes, still reflect social change, although at a much larger level. The industrializing and globalizing stage was completed around the turn of the century. The change in the connectedness of the global economy was far greater from 1830 to 1920 than from 1920 to today. And most of the major innovations that came with industrialization were in place by then too. Those allowed design objects to reach a wider market, as well as greater customization with each passing year. We see this saturation of the industrial trends by the flat lines from roughly 1910 to 1945.

After WWII, we did start another round of changes away from manufacturing and toward services, and toward consumption of more "frivolous" goods and services than more basic ones, as the former became cheaper. What Postrel calls the new age of aesthetics really began in the mid-1980s, perhaps reflecting our greater taste for fashion items as we began to borrow more to buy more.

To conclude, we've found hard data showing that Postrel's hunch was right about the last generation being more and more aesthetically minded. But contrary to her "first time ever" theme, there was fantastic change during the industrializing stage too. Unfortunately the data don't go back to the beginning of that stage, which would probably show the trend even more clearly. But like I said before, that's the expected picture -- there's the shift to agriculture and the shift to industrial capitalism, and the rest are just hiccups.

Update: The historical pattern of rising diversity from the late 19th C through WWI, a stagnation or slight decline from then until WWII, and then another stage of sharp increase, mirrors the pattern of American openness to international trade. We became more integrated from the late 19th C through WWI, became more isolationist and protectionist from then until WWII, and then began reducing barriers to global trade. Perhaps there is some abstract "openness to differences" that characterizes the zeitgeist -- wanting to trade with people all over the world vs. economic nationalism, as well as wanting to explore a wider range of baby names vs. having more parochial tastes.

Appendix

Here are the graphs using the standard statistic. The patterns are harder to see because the lines have to obey a ceiling of 1, whereas the statistic I used lets them go wherever they want as long as they're not negative. The female - male gap doesn't reveal the influence of the disco-punk generation, but the other patterns are there.




The standard statistic is:

(N / (N - 1)) * (1 - sum((share)^2))

Here, N is the number of names. The Social Security Administration gives the top 1000 names, so it's 1000. A name's "share" is what fraction of the sample has that name. We square each name's share, add them up, subtract from one, and multiply by N / (N - 1). This gives us the probability that two randomly chosen individuals will have different names. If it's 0, everyone has the same name, while if it's 1, everyone has a unique name. I include the graphs based on this statistic as an appendix since they show roughly the same patterns but not as clearly, given how constrained the possible values are.

I don't like this statistic because it's forced to lie between 0 and 1, whereas the variance of a distribution just has to be non-negative. We want to let the measure grow infinitely large in order to capture cases where the data are that spread out. I made up my own statistic, but there are probably others like it out there already; not having a PhD in statistics, I don't know what they're called. The idea is similar to the first one. Start with the shares, and see what would happen at the two extremes of "everyone is the same" vs. "everyone is unique."

Like the inventors of the first statistic, I hit on the idea of squaring the shares and summing them up. (It's the obvious way to go if you start down this path.) With an infinitely large number of names, the extremes are 0 for all-unique and 1 for all-same. By taking the log of this, we get new extremes of negative infinity for all-unique and 0 for all-same. Multiply by -1, and they all become non-negative values that increase as the diversity increases, just like a variance is supposed to be:

- ln( sum ( (share)^2))

The sum of the squared shares is the probability that a randomly chosen pair share a name, and we'll just label that p. Then my statistic, which I call the name diversity index, is:

ln( 1 / p)

Again, the key is that it's 0 when everyone is the same and tends toward infinity when everyone is unique, just like variance.

The robber barons slashed prices, boosted output, and saw eroding profit margins

One of the lessons we take away from our high school and college history classes is that during the latter half of the 19th C. America was ruled by robber barons -- powerful businessmen who wielded nearly monopolistic power over the hapless little guy, riding roughshod over the entire society for want of regulatory restraints. That all changed when populist and progressive politicians and muckraking journalists exposed the abuses of Gilded Age and turn-of-the-century industrialists.

Like most folktales, though, it bears little resemblance to the truth. Its function is instead to provide a creation mythology for contemporary regulators to justify present-day attacks on so-called robber barons. I've gone through data on railroads from a turn-of-the-century edition of the Statistical Abstract of the United States, and right in the middle of all of that populist and progressive agitation, it was totally clear that they were pushing an image of the world that was completely backwards. If powerful monopolists are harming consumers, we should see output shrinking and prices soaring. If they were gouging consumers, they should have seen ever greater profits over time -- again, until they were restrained by the government. This approach also allows us to test whether the antitrust legislation had any beneficial effect -- we can just look at what was going on before and after it was passed.

I've chosen railroads because the Wikipedia article on robber barons shows that most of the outrage was directed at railroad magnates -- they are more represented in lists than are captains of other industries. Let's first take a look at output. Imagine De Beers, which used to control almost all of the world's diamond supply, responding to lower revenues -- they'd simply choke off the flow of diamonds into the market, so that diamond buyers would compete more intensely over an artificial shortage of diamonds. Here are graphs showing the total number of miles of railroad in operation, the number of miles added each year, the number of passengers carried, and the amount of freight carried:


The antitrust era began more or less in 1890 with the Sherman Act. Before this time, output did not contract. There is stagnant output from about 1830 to 1850 while the industry is in its infancy. After 1850, though, there may be cycles up and down, but the clear trend is toward steadily greater output over time. If anything, the decade after the Sherman Act was passed saw shrinking or stagnant output. The number of passengers served and the weight of freight carried also rose steadily at least from the early 1880s for the next decade (earlier data are not available). The picture after 1890 isn't clear, but we can rule out a beneficial effect of the Sherman Act, which would have sent the numbers steadily upward and at a faster rate than before. Remember, the trend was already increasing before 1890.

This behavior is the opposite of a monopolist who would want to only serve fewer and fewer people. Imagine if the Super Bowl organizers sold 1000 fewer tickets year after year -- prices would skyrocket. So, these three separate measures of output show that railroad owners behaved in the opposite way of monopolists -- they kept giving consumers more of what they wanted.

We might predict from this that prices that consumers paid would have fallen as a result of expanding output -- when there's a glut of stuff, people prefer to pay less for it. The evil robber baron picture predicts that prices should have shot up. Let's see who is right by looking at freight rates on wheat per bushel (in dollars), while comparing rates across three types of transportation:


Water-only transport became nominally more expensive from the early 1850s through the late 1860s, although this is not adjusted for inflation. The key is that it began falling sharply from the late 1860s through the late 1870s, fell a bit more shallowly for another decade, and declined very modestly after 1890. Here is a completely different method of transportation -- by water rather than over land -- and we see falling prices. So at least owners of water transport were not monopolists. Was the story any different for the rates that railroad owners charged? Not at all: we see the same pattern of rapid decline from the late 1860s through the late 1870s, modest decline for another decade, and very slow decline after 1890. Again, we see no effect of the Sherman Act -- if anything, the antitrust era saw slower price decreases.

So, railroad magnates were the opposite of monopolists, boosting output and charging lower prices over time. Still, we might salvage the picture of bloated industrialists by looking at their profits -- you could charge lower prices and make up for it on volume. Alas, when we look at how much money they brought in for carrying either passengers or freight for a mile (in cents), we see that railroad owners pocketed less and less dough:


Whether it was from freight or passengers, railroads received less and less money from at least the early 1880s onward, again with no sign of the Sherman Act in the data. The leading railroads have data going back farther, and they show falling revenues going back at least to the 1870s. Here too we see that the antitrust era that began in the 1890s was associated with a slower rate of declining revenues. In fact, the robber barons took their biggest clobbering of the Gilded Age during the 1870s, decades before there was any substantial elite outcry to rein them in.

That is exactly what we expect from a new and highly profitable industry -- once businessmen hear about how profitable it is, more and more will enter it, and the resulting bitter competition will drive down profits until the industry is no more profitable than a typical industry. If you were one of the lucky initial railroad owners back in the 1830s, you may have made a pretty penny for the moment when you had little or no competition. But at least by 1870 -- and probably somewhat earlier -- that brief period of uncolonized paradise was long gone. The magnates saw leaner and leaner profit margins, while consumers saw more and more miles of railroads that could carry them and their stuff for lower and lower prices.

Not to put too fine a point on it, but a lot of what we learned in school about businessmen was utter nonsense. If we taught facts, we would teach kids that the robber barons kept giving their consumers more of what they wanted and at lower prices -- and these data don't even factor in the consumer benefits of enjoying improvements in quality that railroads implemented as they grew from newcomer to mature industries. A railroad trip in 1885 was more pleasant than a railroad trip in 1845. And all the while, they made less and less money on these ventures, rather than fatten themselves up by abusing their power, which they clearly had very little of.

The facts are not hard to understand, so that's not the reason that they aren't taught. Indeed, the teachers themselves don't know these facts because they're not taught in intro college history classes either. The idea that captains of industry were ruining the lives of ordinary people can be very easily tested with data available to anyone with an internet connection, and the results show that our received picture of the world is not just a little bit off but completely wrong. As I said earlier, this mythology about the dark demons known as robber barons and the angelic saviors called populists and progressives is really just another creation myth. Like other such myths, it merely rationalizes the will of the group that is currently in power -- namely, the government and particularly the regulators.

"Why do those people have jobs, teacher?"

"Well, you see Jayden, if we didn't have them, darkness would descend over the land. Let me tell you the story of how the world used to be before the antitrust regulators arrived to deliver us from the wickedness of the robber barons..."

This fake picture we have extends to other industries as well -- I got the idea for this post by learning about the history of Standard Oil, which also was responsible for higher output, lower prices and profits, and saw its market share erode over time. In the popular-audience stuff, I haven't seen much discussion of railroads, although there may be academic articles on the topic. The most important thing here is the graphs, which you rarely see even in journal articles. You're lucky to see full tables. Here, the pattern jumps out at you, showing just how ridiculous the stories we've been told are.