Working Paper: NBER ID: w27400
Authors: Naomi R. Lamoreaux; John Joseph Wallis
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.
Keywords: economic crisis; general laws; American political economy; mid-nineteenth century transformation
JEL Codes: K1; K2; N4; N41
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| economic crisis of the early 1840s (N13) | states default on their bonded debt (H74) |
| states default on their bonded debt (H74) | political transformation (P39) |
| political transformation (P39) | revision of state constitutions to ban special legislation (K16) |
| economic crisis of the early 1840s (N13) | revision of state constitutions to ban special legislation (K16) |
| revision of state constitutions to ban special legislation (K16) | transformation of the workings of government and the economy (P16) |
| revision of state constitutions to ban special legislation (K16) | rise of the modern regulatory state (G18) |
| changes enacted in Indiana (K23) | precedent that spread to other states (K16) |