The Relative Profitability of the Institution of American Slavery: 1830-1860

January 2, 2006 Abstract The profitability of owning slaves has been a popular area of research in economic history. Existing analyses have focused on estimating the rate of return on slaves and presenting rates of return on other available antebellum investments. Modern stockportfolio performance measures allow us to rank the owning on slaves with other investments of the period over an extended period of time. In addition, these performance measures provide us with the opportunity to consider both risk and return in conducting this evaluation instead of relying on summary statistics concerning rates of return. Utilizing the distance from the efficient frontier as our metric of performance, we conclude that owning slaves outperformed the other investments of the period. Since the directional distance methodology is deterministic in nature, we perform a probabilistic analysis using bootstrapping to form confidence bounds on our estimates. The dominance of slave owning is confirmed from inspection of the resulting bounds. Our results verify that the institution of slavery was a very financially rewarding enterprise that demanded a military resolution rather than relying on its ultimate economic extinction.