Odd Lots Podcast Summary: "What 300 Years of Firewood Prices Say About the Economy"

Podcast Information:

• Title: Odd Lots
• Host/Author: Bloomberg
• Description: Bloomberg's Joe Weisenthal and Tracy Alloway explore the most interesting topics in finance, markets, and economics. Join the conversation every Monday and Thursday.
• Episode: What 300 Years of Firewood Prices Say About the Economy
• Release Date: July 25, 2025

Introduction to the Topic

In this insightful episode of Odd Lots, hosts Joe Weisenthal and Tracy Alloway delve into a unique and historically rich topic: the evolution of firewood prices in the United States over the past three centuries and its broader economic implications.

Tracy Alloway opens the conversation, highlighting the surprising lack of comprehensive data on firewood prices despite its historical significance. Joe Weisenthal humorously remarks, “We have data on literally every other commodity in the world, but I don't have a 300-year time series on firewood prices” ([02:35]).

Guest Introduction: Nicholas Muller

Joining the hosts is Nicholas Muller, the Lester and Judith Lave Professor of Economics, Engineering, and Public Policy at Carnegie Mellon University. He is the author of the seminal paper Firewall in the American Economy 1700-2010, which meticulously compiles historical firewood prices and examines their impact on economic indicators like GDP and agricultural productivity.

Nicholas Muller begins by explaining his fascination with firewood as a primary energy source and the gaps in historical economic data:
"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." ([05:16])

Why Firewood? The Pre-Dominance of Wood in Energy Consumption

Tracy draws a parallel between firewood and modern oil, questioning if firewood was the 1800s equivalent of oil in powering the American economy. Muller affirms this comparison, noting that between the American Revolution and the Civil War, firewood was the cornerstone of energy consumption across households and industries.

Tracy Alloway shares a personal connection:
"I am the proud owner of a wood-burning stove now, and formerly a coal-burning stove." ([04:15])

Filling the Data Gap: Gathering Historical Firewood Prices

One of the critical contributions of Muller's research is addressing the missing historical price data. Initially, firewood was sourced directly from landowners, making formal pricing scarce. However, urbanization between the American Revolution and the Civil War catalyzed the emergence of commercial firewood markets, recorded meticulously in advertisements and probate records.

Muller explains the data collection process:
"The probate records, for instance, that comprise the very early price series were all in those sources. I found it all online." ([44:10])

Key Findings: Firewood Prices Over Three Centuries

Muller's analysis reveals three significant phases in firewood pricing:

1. 1700 to 1800:

   • Price Volatility: Prices were highly volatile with no significant trend when adjusted for inflation.
   • Quote: "Firewood prices were basically changing at the same rate that the price indices were changing." ([11:14])

2. 1800 to Civil War:

   • Real Price Increases: Firewood prices rose between 0.5% and 1% annually in real terms.
   • Quote: "Firewood prices started to increase in real terms, implying that they were rising more rapidly than inflation." ([11:14])

3. Post-Civil War to Late 20th Century:

   • Stability with Notable Exceptions: Generally stable prices with spikes during the 1970s energy crisis.
   • Quote: "After the Civil War, there's not a lot of evidence of systematic price changes until late in the 20th century." ([11:14])

Drivers Behind Price Changes: Demand and Supply Dynamics

The significant real price increases between 1800 and the Civil War were primarily driven by escalating demand as the population grew and manufacturing expanded. Concurrently, urbanization reduced the availability of firewood near cities, increasing transportation costs.

Muller discusses the interplay of railroads and firewood:
"Locomotives... burned wood as well, which meant railroads both lowered transportation costs and increased demand for firewood." ([14:13])

He further elaborates on the scarcity story:
"The supplies of wood were getting scarce closer to cities, leading to higher transportation costs." ([14:13])

The Transition to Coal: Why Coal Superseded Firewood

The shift from firewood to coal was multifaceted. Coal not only became cheaper due to declining production costs but also offered higher energy density, making it more efficient for both consumers and industries.

Muller explains the competitive edge of coal:
"Coal is cheaper and has a higher BTU content, making it more efficient for consumers and businesses." ([28:02])

Additionally, the logistical benefits of coal, such as easier storage and management compared to bulky firewood, further accelerated its adoption.

Persistence of Firewood into the 20th Century

Despite coal's dominance, firewood remained a significant energy source well into the 20th century, particularly in certain regions and during economic or geopolitical crises.

Tracy Alloway highlights periods of resurgence:
"The 2008 financial crisis saw demand for firewood go up as people sought cheaper heating alternatives." ([31:46])

Muller discusses the resilience of firewood:
"Pockets of continued significant reliance on the fuel existed long after the mid-1800s transition." ([30:43])

Implications for Modern Economic Measures and Energy Transitions

Muller's research underscores the importance of considering natural and informal markets in economic measurements. Firewood consumption was closely tied to agricultural productivity, which traditional GDP metrics had overlooked.

Muller connects historical transitions to modern energy debates:
"Energy transitions are often associated with social upheavals, like the financial crisis or wars, which drive shifts in energy sources." ([38:17])

He emphasizes the need to account for natural capital in economic metrics:
"Natural capital, like trees and ecosystems, plays a crucial role in economic growth and sustainability." ([38:17])

Technological Influence on Firewood Markets

Technological advancements in transportation, particularly the development of railroads, played a pivotal role in both supplying firewood to urban centers and increasing its demand within the railroad industry itself.

Muller details the dual impact of railroads:
"Railroads were both enhancing supply by moving wood efficiently and increasing demand by consuming large quantities for fuel." ([19:38])

Future Research and Broader Economic Lessons

While Muller's study provides a comprehensive historical analysis, it opens avenues for future research on price dispersion and market transparency in informal economies.

Muller suggests potential future studies:
"Price dispersion and regional convergence during the 1800-1860 period are ripe for further exploration." ([25:31])

He also touches on the broader implications for modern economies:
"Understanding historical energy transitions can inform current debates on sustainability and energy policy." ([38:17])

Concluding Thoughts

The episode concludes with reflections on the enduring relevance of historical economic data and the transformative impact of digitization and AI on economic research.

Tracy Alloway muses:
"Now I'm thinking about all the new data sources that we're going to find thanks to digitization and AI and the impact on how we understand the economy." ([44:04])

Joe Weisenthal adds:
"It's fascinating to see how historical patterns of commodity pricing and transportation infrastructure can inform our understanding of today's energy challenges." ([46:10])

Muller emphasizes the importance of comprehensive economic measures:
"Measuring GDP in the strictly market sense needs to evolve to include home production and natural capital." ([43:36])

Key Takeaways

• Historical Significance: Firewood was the primary energy source in the US from the 1700s to the mid-1800s, comparable to oil in modern economies.
• Data Gaps: Comprehensive historical data on firewood prices were previously lacking, hindering accurate economic analyses.
• Urbanization Impact: The shift to urban living created formal markets for firewood, enabling detailed price tracking.
• Energy Transition Drivers: Increasing demand, transportation costs, and the advent of railroads fueled the transition from firewood to coal.
• Persistence of Firewood: Firewood remained relevant into the 20th century, especially during economic crises.
• Economic Measurement: Incorporating informal and natural capital into GDP metrics provides a more holistic economic picture.
• Modern Relevance: Historical energy transitions offer valuable lessons for contemporary energy policy and sustainability efforts.

Notable Quotes

• Joe Weisenthal [02:35]: "We have data on literally every other commodity in the world, but I don't have a 300-year time series on firewood prices."
• Nicholas Muller [05:16]: "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."
• Nicholas Muller [11:14]: "Firewood prices were basically changing at the same rate that the price indices were changing."
• Tracy Alloway [04:15]: "I am the proud owner of a wood-burning stove now, and formerly a coal-burning stove."
• Nicholas Muller [38:17]: "Energy transitions are often associated with social upheavals, like the financial crisis or wars, which drive shifts in energy sources."

This episode of Odd Lots offers a profound exploration of how a seemingly mundane commodity like firewood can illuminate broader economic trends and transitions. Muller's research not only fills a critical historical data gap but also provides valuable insights into the dynamics of energy consumption, market formation, and economic measurement that remain relevant today.