What 300 Years of Firewood Prices Say About the Economy

SPEAKER_2 (0:02)

Bloomberg Audio Studios, Podcasts, Radio, News.

Tracy Alloway (0:18)

Hello, and welcome to another episode of the Odd Lots Podcast. I'm Tracy Alloway.

Joe Weisenthal (0:22)

And I'm Joe Weisenthal.

Tracy Alloway (0:24)

Joe, you know what's been missing in my life?

Joe Weisenthal (0:27)

Go on, chickens.

Tracy Alloway (0:28)

Oh, yes, actually, chickens still missing in my life, but also a comprehensive series of historical firewood prices in the US for the past 300 years.

Joe Weisenthal (0:39)

You know what, we have data on literally every other commodity in the world, but I don't have a 300 year time series on firewood prices. And I always feel like if I just had that number, then I would have the complete picture of commodities.

Tracy Alloway (0:52)

Well, I know we're sort of joking, but this is actually important because if you think about the US in the 1700s or the 1800s, people used firewood. The vast majority of America's energy consumption came from wood.

Joe Weisenthal (1:06)

Wait, do you remember a couple months ago when I was that guy who brought up wages of destruction in every chat?

Tracy Alloway (1:13)

Are you going to do it again? No. Well, you just did.

Joe Weisenthal (1:16)

No, now I'm going to be the guy who brings up Moby Dick in every conversation.

Because I've been reading Moby Dick, and so I'm really interested in energy transitions in the 1800s, because one of the things that has come up in some of our past conversations, such as with Bob Brack, et cetera, whale oil is basically the only energy source that we've completely eliminated. Every other historical energy source that we've had, we're still using it to some degree. They never totally disappear. And so I'm very interested in the phenomenon of past historical energy transitions. People talk about the transition now, but it's interesting to sort of examine other periods when one form of fossil fuel or other fuel went out of style, so to speak, or became uneconomical.

Tracy Alloway (2:00)

Well, I have to say, as the proud owner of a wood burning stove now, and formerly a coal burning stove.

Joe Weisenthal (2:07)

Yeah, you're interested in energy transition too.

Tracy Alloway (2:09)

Absolutely. So I am very pleased to say that we have the perfect guest. We are going to be speaking with the author of a paper that's called Firewood in the American Economy, 1700 to 2010 And it is all about collecting historical data on firewood prices, and then figuring out how that fits into the wider economy, and measures of other things like output and productivity and things like that. So, we have Nicholas Muller. He is the Lester and Judith Laive Professor of Economics, Engineering, and Public Policy over at Carnegie Mellon. So, Nick, welcome to the show.

Nicholas Muller (2:46)

Thank you so much. The pleasure to be here.

Tracy Alloway (2:49)

Why don't I start out with why firewood? And I know I mentioned that firewood was the majority of US energy consumption for many, many years. Is it right to think of it sort of as like oil? The 1800s equivalent of oil powering the entire economy?

Nicholas Muller (3:08)

Yeah. So there are two reasons why I focused on this particular topic in a paper. One, as you said, somewhere around or before the Civil War, back before the American Revolution and the founding of the country, essentially all the energy in the US economy, whether it was in households or firms doing primitive things, it was all coming from firewood. And so the fact that the academic literature and government statistics didn't really have a reasonably comprehensive time series of these prices seemed like a really big gap to me. And so that was one reason to just set out filling that knowledge gap. The other was prior to being at Carnegie Mellon, I taught at Middlebury College in Vermont, and my wife and kids and I used to get heat from firewood in a wood stove. And so you participate in these informal markets for firewood even today, and it got me thinking about what that must have been like long ago. And sure enough, it turned out to be a pretty interesting process to gather these prices.

Tracy Alloway (4:12)

I never thought of going to Lowe's to buy a bundle of firewood as participating in an informal market. I guess it is formalized nowadays. But certainly, if you're a professor, that's probably how you're thinking about it.

Joe Weisenthal (4:24)

I used to live in Vermont. And I remember it was not that uncommon for people to buy a quart of firewood or however much they anticipated needing for the winter to heat their homes, etc. So I get the idea that, okay, fire was this dominant source of energy for a long time in the American economy. What are we gained by actually having the numbers? Okay, we know it. We know the fact about firewood's existence and prominence. What does it help us now? And we'll get into the details, but what does it help us now to actually have some sense of the size and scale?