Alexander HamiltonI had invited a good acquaintance, Dick Sylla of NYU, to the Junto meeting this past week. Dick, who is an economist specializing in economic history, is working on a book on Alexander Hamilton focusing on his economic and financial contributions. I though his presence might elicit a more interesting discussion. But it turned out that he was unable to attend. He had asked me to comment on the meeting. I sent him the response below, and he then responded to what I had written. With his permission I am publishing it. (It appears below my e-mail contents to him and his initial e-mail to me.) Also linked is his published article on the financial crisis of 1792 and Hamilton's role in stabilizing the situation that he sent me and that readers will find interesting on both it account of the crisis and for a different view of Hamilton:

Dear Dick,

I am really sorry that you were not able to make it. We really could have used you there. Unfortunately there was no one there who really contested his views. There were a whole number of questions but very little in the way of defense of Hamilton. Aside from asking him how the world would have differed with regard to industrial development in the U.S. had Jefferson rather than Hamilton prevailed, I kept quiet because unfortunately my knowledge of the period and of Hamilton is too weak for me to have stood my ground. His response to my question was that for that Jefferson was not really against manufacturing or banks just on subsidies thereto. He noted that for the first decades of the Republic tariffs were low and Jefferson repaid much of the debt so that the results on industrial development would not really have differed. He claimed that the Bank of the U.S. was responsible for very high inflation in its first five years. I just have no idea what the facts are. I had thought our inflation problem came in the pre-Constitution days but would really have to go and look at the data. His suggestion was really that Hamilton introduced the concepts of the lack of limits on government power and the expansive view of the commerce clause–his overall view of the constitution — was what has allowed the government to expand its power in the past 150 years. Had I wanted to just be argumentative I might have been more direct in noting that his attack on Hamilton buying and owning slaves was hardly as anti-freedom as Jefferson favor of the Southern agrarian economy that depended on slave labor. Some question was raised as to how honest and or rich Hamilton really was, with Di Lorenzo noting that he believed that Hamilton buying up millions face value of government debt at a small fraction of its face value in the knowledge of plan to have the federal government pay it off in full allegedly for his brother-in-law in fact must have benefited Hamilton also. His dislike of the Supreme Court asserting the right to determine what the Constitution meant under Justice Marshall, whom he claims did so under Hamilton's influence ignores the fact that the other two branches are even more likely to decide based on the pressure of the democratic vote and it was that Court that initially resisted the efforts of FDR to expand the role of government and only relented under the pressure of president to pack the court to get his way or that it did not really use that right again for a long time after that initial critical precedent setting decision. But I did not believe much would be served by bringing up that point since it was not central to his arguments against Hamilton. He claims that Jefferson read "The Wealth of Nations" but doubts that Hamilton did or that he believed in the arguments of Adam Smith on the market. But as I recall Jefferson's plantations lost money over the years and he also died bankrupt making me doubt how astute Jefferson really was on economics– but unfortunately I do not really know the facts. He claims Hamilton was the one who favored the views of the Jacobites in France with regard to the public good, but I thought Jefferson never wavered in his support of the French Revolution and frankly do not know what view Hamilton held in this regard. It's time for me to do some reading on the early days of our republic.

Best wishes,


Dear Rudolf,

Thanks for this good account. I'm surprised there wasn't more contesting of his views–I guess he was preaching to the (libertarian) converted! His book argues that AH is responsible for almost everything he doesn't like about the US; he has an earlier book where he says almost the same thing about Lincoln–that one must have established the pattern! I suppose books such as these, when one stands back and says why were these written long after the subjects died of their wounds, are really in a sense tributes to how influential the two historical figures have been.

On some specifics, yes, there was some inflation in the early 1790s, mostly from 1793 to 1796. Since the BUS [Ed.: First Bank of the United States] started at the end of 1791, it is a weak candidate as a cause, and from the 1796 peak prices were fairly level, maybe a slight downtrend, to 1810, when the BUS continued. Consumer prices rose only 4.5% from 1790 to 1792, and then 38% from 1792 to 1796. Two better explanations, I think, are (1) that the outbreak of war between France and Britain in 1793 either disrupted trade/imports and raised prices or led to large increases in demand (and perhaps money/specie inflows) on the part of the belligerents for American products and shipping services (an old story told by economic historians), and (2) wheat was an important commodity and seems to have risen in price a lot in 1795 and 1796 because a pest called the Hessian fly did a lot of damage to wheat crops. We also know that foreigners were buying a lot of American securities (US debt and BUS stock in particular) in these years, leading me to wonder whether capital inflows pumped up prices, just as they do in emerging markets today. Anyway, the issue of the early 1790s inflation could use more research.

AH certainly did push for more federal power, but at a time when the gov't was brand new, weak, and very much needing to establish its authority and respectability. I and others consider this one of his and the Federalists' greatest achievements. Maybe that power was misused and abused later in history, but that can hardly be blamed on the 1790s generation. The alternative might have been British or French invasions, breaking up the country, or even a break up of the country without such invasions (as in 1861). We forget that these were real concerns at the time.

The evidence for Hamilton owning slaves is quite weak, although as an agent he may well have purchased or sold them for others. We know he detested slavery from his West Indies days and did throughout his life. The definitive Papers of AH (27 volumes with extensive notes) has just one letter from around 1781 or 1782 when he says he is sending someone, maybe John Jay, money "for the woman", which might have been a slave he bought to help out at home where his wife had just had a kid or two, but it might have been a rental as well. The editors of the papers say that one comment is the only evidence there is that AH might have owned a slave. A person such as Di Lorenzo has to make a big thing of this because of Jefferson's vulnerability on slavery–we know he owned 200 of them, and probably fathered a few!

There is no evidence that AH speculated in gov't debt before, during, or after his term at Treasury. He was determined to pay our debts honorably, and so it's likely that those who knew him and had confidence in him would speculate in the way Di L describes. But I think I can use information on securities prices (see our recent article "AH, Central Banker", showing some of our price evidence, used in the article for another purpose) that I've gathered to show that those prices fluctuated a lot from 1788 to 1792, and any speculator could easily have gotten burned by the fluctuations. We know that AH succeeded, but a person living in 1789, 1790, and 1791 could not be sure of that. This illustrates a major problem of historical interpretation.

Di L is right that AH was an early and strong proponent of judicial review (in Federalist 78), and that Marshall, his disciple, carried on in that tradition after AH was gone (or even before, since a key case, Marbury , was in 1803). Your misgivings about Di L on this are well taken–the Supreme Court often constrains presidents and Congress from doing unconstitutional things, even if a democratic majority favors them. Hamilton and Madison worried about the tyranny of the majority; they were not so fond of democracy, but were extremely fond of constitutional government.

Hamilton and all the other top guys certainly read Adam Smith. Hamilton's famous Report on Manufactures (1791) is in fact one of the earliest extended commentaries on Smith–he doesn't cite Smith specifically but says things like 'some writers contend….' after which he quotes Smith almost verbatim! And then agrees with some of Smith and disagrees with other parts of Smith.

It's altogether wrong to say AH favored the views of the Jacobins (not Jacobites) in France. That was Jefferson. Jefferson and his allies taunted Hamilton and the Federalists as "monarchists", and the latter responded by calling the former "Jacobins." You are right that TJ hardly ever wavered in his support of the French Revolution. AH saw it spelled trouble from the start (in a letter warning Lafayette to be careful not long after the storming of the Bastille), and he even predicted the bloodbath that was to occur in France shortly. Both France and Britain, much larger states and powers, caused a lot of trouble for the 4 million Americans living in the early 1790s.

Gordon Wood, a distinguished historian, has a new history of the years 1788-1815 just out, called Empire of Liberty . He cites some of my stuff, but I think he doesn't entirely understand Hamilton because of some of his own blinders (which are much smaller that Di Lorenzo's blinders). Maybe even better is The Age of Federalism , covering 1788-1800, by S. Elkins and E. McKitrick, published in the 1990s and now available in paperback. Both of these are 'big' books. So is Chernow's 2004 biography of Hamilton, also worth reading, although my favorite is still the one by Forrest McDonald (a conservative, but not a libertarian bloody-shirt-waver such as Di L).

Best, Dick


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