Activities

1. Webster vs. George: Contrasting Views

Land speculation, considered to be a major cause of the Panic of 1837, was defended by Daniel Webster, senator from Massachusetts:

The government land, therefore, at the present prices, and at the present moment, is the cheapest safe object of investment. The sagacity of capital has found this out, and it grasps the opportunity. Purchase, it is true, has gone ahead of emigration; but emigration follows it, in near pursuit, and spreads its thousands and its tens of thousands close on the heels of the surveyor and the land hunter…Nor are we to overlook, in this survey of the causes of the increase in the sales of public lands, the effects, almost magically, of the great and beneficent agent of prosperity, wealth and power, internal improvement.
Citing land speculation as a major cause of depressions, Henry George, reformer and economist, later criticized this type of venture:

Given a progressive community, in which population is increasing and one improvement succeeds another, land must constantly increase in value. This steady increase naturally leads to speculation in which future increase is anticipated, and land values are carried beyond the point at which, under the existing conditions of production, their accustomed returns would be left to labor and capital. Production, therefore, begins to stop. Not that there is necessarily, or even probably, an absolute diminution (decrease) in production; but there is what in a progressive community would be equivalent to an absolute diminution of production in a stationary community - a failure of production to increase proportionately, owing to the failure of new increments of labor and capital to find employment at the accustomed rates.

Now that you have read these divergent views, please answer the following questions:

  1. How valid is the argument presented by Webster?
  2. How valid is the argument presented by George?
  3. What does Webster recognize as the reason for an increase in land sales?
  4. What does Webster mean by the sagacity of capital"?
  5. Why, according to George, does land speculation lead to a halt in production?
  6. Assuming that land speculation is a cause of depressions, how can it be prevented?
  7. Are periods of boom and bust inevitable in our type of economy?

2. Analyzing a Chart: Money Supply and Price Levels, 1832-1836

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YearIndex of PricesSpecieTotal Money Supply
Base (1834-
1842=100)		Year-to-year
% change		Millions
of dollars		Year-to-year
% change		Millions
of dollars		Year-to-year
% change
183291-31-150-
1833954413216812
183490551241722
183510820652724643
183612213731227612

Place the above chart on the board; explaining each column, as:

  1. year containing the data
  2. index of changes in the price level, from one year to the next
  3. percentage of change from one year to the next
  4. value of silver and gold in circulation
  5. percentage of change in specie from one year to the next
  6. total of-money in circulation, include old, silver and paper currency
  7. percentage of change in money supply from one year to the next
Economists believe that inflation is usually associated with unduly large increases in the money supply. This appeared to be an inflationary period. Have the students examine the chart and then respond to the following:
  1. To what degree is there a relationship between prices and money supply?
  2. What effect did an increase in specie have upon the money supply?
  3. Excluding specie, to what degree was paper money increasing?
  4. How did the Specie Circular, administered by Jackson, affect the picture?
  5. Although these figures are limited, does the chart give us any clue as to the effect that land
  6. speculators had upon the rise in price levels between1832 and 1836?

3. Research on Business Cycles

Divide the class into groups, each group will be responsible for researching one of the economic crises on the chart below. Students then fill in the missing data.

Onset
of crisis		Length
of crisis		Severity
of crisis		CausesMeasures
taken
1781....
1819....
1837....
1857....
1873....
1907....

After this information has been gathered, please request the students to answer the following questions:

  1. Are there any causes that appear in more than one crisis? Explain them.
  2. Were there any significant events that preceded these business cycles?
  3. Were any of these crises caused by governmental action? Explain.
  4. Can business cycles be eliminated or are they part of our system?
  5. What actions have been taken in the most recent recession?

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