The Economics of the Civil War
2. Economic Tools for Understanding the War
Opportunity cost is the proper economic basis for specialization and trade in resources. Opportunity cost is the highest value you give up when you make a choice. It was Confederate government policy that caused misallocations on the part of the South, making it inefficient and wasteful. A few of those bad policies were: drafting soldiers, confiscating resources, and monetary inflation.
Rent-seeking and interest groups are also tools. They speak to why the North and the South split up in the first place. The key to understanding the Civil War was resource allocation. It was greed for resources not grievances between races. The South produced tobacco and cotton and they fought for these tradable exports.
Lecture 2 of 8 from Mark Thornton's The Economics of the Civil War, presented to the Auburn University Academy for Lifelong Learners.