Economic Crisis, General Laws, and the Mid-Nineteenth-Century Transformation of American Political Economy

Naomi R. Lamoreaux and John Joseph Wallis

No 27400, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Before the middle of the nineteenth century most laws enacted in the United States were special bills that granted favors to specific individuals, groups, or localities. This fundamentally inegalitarian system provided political elites with important tools that they could use to reward supporters, and as a result, they were only willing to modify it under very special circumstances. In the early 1840s, however, a major fiscal crisis forced a number of states to default on their bonded debt, unleashing a political earthquake that swept this system away. Starting with Indiana in 1851, states revised their constitutions to ban the most common types of special legislation and, at the same time, mandate that all laws be general in their application. These provisions dramatically changed the way government and the economy worked and interacted, giving rise to the modern regulatory state, interest-group politics, and a more dynamic form of capitalism.

JEL-codes: K1 K2 N4 N41 (search for similar items in EconPapers)
Date: 2020-06
New Economics Papers: this item is included in nep-his, nep-hpe, nep-law and nep-pol
Note: DAE
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Published as Naomi R. Lamoreaux & John Joseph Wallis, 2021. "Economic Crisis, General Laws, and the Mid-Nineteenth-Century Transformation of American Political Economy," Journal of the Early Republic, vol 41(3), pages 403-433.

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