Alaska: not such a great deal?

Alaska may not actually have been that great a deal, financially speaking, for the U.S. I’ve added a new question to the list of potential research questions page asking some follow-up questions. Maybe the U.S. expanded too much? Or should we have expanded a little more while the gettin’ was good?:

Did the U.S. expand too far? Should it expand more? Economist David Barker put out a paper recently that complicates the typical view that Alaska was a great deal for the US, which purchased the state in 1867 for $7 million USD. Alex Tabarrock at the group economics blog Marginal Revolution has a brief write-up on the article, which concludes that discounted net present value of Alaska at the time of purchase probably didn’t reach $7 million. The article goes further at the end and asks: “The results of this paper suggest new lines of inquiry in the history of the West, such as: Has westward expansion been worth the price? What have been the costs and benefits? Should expansion have been less or greater than it was? Should United States expansion continue? Should the United States shrink by cutting ties with its remaining possessions?”

This seems like a good application for a little firm theory, trade theory, comparative government wonkery, and M&A number crunching. We’ll probably have to narrow the question down to physical chunks of territory that changed hands at a certain price as the result of actual negotiations, just to make sure we have a solid purchase price to compare to a discounted cash flow or other model of value. Although, let’s not forget that territory is often conquered by force, and the price of potential wars can be estimated within certain bounds. Also, for territory that was relinquished freely or never sought after in the first place, estimates may be made based on the value of what the US got in return (say, by maintaining good business ties and peaceful relations, for example).

Of course, the question is moot because as everyone knows we were just exercising our Manifest Destiny.

As always, if anyone has any thoughts on a good way to approach this question, post in the comments.

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This is a group blog. JSC5 currently writes from the US. JSC7 writes from behind the Great Firewall of China.

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