Search

This paper answers the following question. If returns from smuggling cotton and contraband through the blockade of Confederate ports during the American Civil War were significantly lower than earnings from alternative investments, why did private firms so quickly adopt costly purpose-built steam ships in the face of the strengthening Northern blockade? First, we note that the rate of diffusion of steam ships, specially designed to run the blockade significantly exceeded any reported for innovations from the late 19th or early 20th century. Second, we correct an error in Stanley Lebergott's (1981) seminal work and conclude that that returns to infamous steamer, the Banshee (I) of 700% to be quite plausible. This finding of high returns is confirmed by two other historical sources, which have not been previously used. Additionally, we calculate that investors in the one of the leading blockade running firms, known as the Bee Company, earned in excess of 86% return on their investment, over double the profits previously reported. Finally, we demonstrate that adoption of purpose-built ships, significantly decreased the arrival rate of capture, thus increasing expected profits. [ABSTRACT FROM AUTHOR]

In his seminal study on the economics of blockade running during the Civil War, Stanley Lebergott raised the paradoxical question, "If smuggling yielded spectacular profit rates, why did so few successful investors try a second time?" Using Marcus Price's data on thousands of shipping runs, Lebergott estimated "that fewer than ten percent of the runners made more than a single trip through the blockade." Employing the same data used by Lebergott, we find startlingly different results. [ABSTRACT FROM AUTHOR]