The U.S. Army as a Rational Economic Agent: The Choice of Draft Animals in the Nineteenth Century

Kyle D. Kauffman
Economics Department
Wellesley College

I. Introduction

It has long been believed that waste and fraud was the rule rather than the exception in government agencies. These allegations have been leveled against those who buy government property, use it, and ultimately dispose of it. Few in government escape the charge of wasting taxpayers' money. To put the best light on it, those who, for example, control purchases for government bureaucracies are not spending their own money--thus the incentive to carefully agonize over the cost of each purchase is reduced relative to the scenario where the bureaucrat was buying something with her own money. This is not to say that those who hold government purse- strings may spend freely on any purchase they deem necessary; certain spending controls are in place. However, it has been widely documented in the popular press that these controls are not terribly rigid.

Recently, striking examples of such procurement practices have been uncovered regarding US Army purchases. These include such highly publicized items as the $800 toilet seat, the $500 coffee maker and the $400 monkey-wrench. Just such procurement problems were so pervasive in government purchases that Senator William Proxmire developed the highly discoveted "Golden Fleece Award." This award was contrived to expose wasteful spending by the government and seems to be a measure of desperation on the part of the Army's would-be monitors.

Given that government's share of spending in the economy is so high; it is important to know, is much of it wasteful? Even if entities such as the military are not perceived to be "rational agents" one must agree that even an institution such as the Army will endeavor to make the most of the budget it is assigned. Surely, it would be conceded that those who control the procurement of military goods want to be surrounded by as much high quality equipment as their budget could afford.

This paper looks at a very specific type of army procurement, the Army's purchasing and issuance of draft animals. During the 19th century the Army purchased a great many of the draft animals available in the United States. In 1862, for example, the Union Army alone owned nearly 4% of all horses and mules enumerated in the entire US census of 1860.

The Army issued both draft horses and draft mules to its enlisted men to use to pull wagons and move equipment. Reports of the Quartermaster General show that between 50%-90% of draft animals purchased in the latter part of the 19th century were mules. In light of the fact that mules were always more expensive to buy than horses, the argument of overspending on Army purchases quickly comes to mind. Given that the Army had a clearly cheaper substitute in the horse, the high percentage of mules bought seems to suggest that extravagant purchases by the Army were endemic problems throughout its history. This paper aims to show that in fact draft animal procurement by the Army can be defended on rational economic grounds. They can be viewed like the decisions made by landlords and mine owners where the owners of work stock often found it in their best interest to issue employees the more expensive, yet more resilient mule (Kauffman 1992, 1993a, 1993b). The Army wanted to preserve its capital from excess depreciation brought on by abuse and neglect from enlisted men who had little incentive to care for the public animals in their charge.

II. Draft Animals in the US Army

From its inception the army made use of a great number of animals. The type and number varied owing to the ever changing needs of the army, but all of the various breeds can be categorized into two basic types: riding animals and draft animals. Nearly all of the riding animals used by the army were horses, whereas the draft animals could be either horses, mules or in a very few cases, oxen.

For purposes of inventorying animals, the Army used the following categories: cavalry horses, artillery horses, private horses, horses, mules and oxen. Cavalry horses were ridden by enlisted men and some low ranking officers. Private horses were ridden by officers and had the distinction of also being owned by them. All officers had to provide their own mounts, but these horses were boarded and attended to at no cost to the officer. Artillery horses pulled the artillery, but many were also simultaneously ridden by soldiers so as to guide them while pulling the artillery. The simple classification of "horse" was an all-purpose draft horse that was used to pull wagons, move logs, haul material on its back, etc. The classification "mule" was also a generic title in which the animal would also be used to pull wagons, move logs, and haul material on its back, as in the case with the "horse." Finally, a few oxen were used to pull wagons, but their use was very sparse.

The use of horses for cavalry purposes was not surprising for a number of reasons. First, the horse was used by nearly everyone in the United States as the riding animal of choice. And because the gait of the horse and the mule are somewhat different it would make sense to issue to soldiers a type of animal they were already accustomed to riding. In a sense, the army wanted to make use of the human capital built up by the soldiers in their private life. Second, because the soldier riding the animal did not have a direct vested interest in preserving the capital value of the horse it should be somewhat surprising that riding mules were not issued to them. As it was, if the horse died the army would supply him with a fresh remount. But, the assignment of blame if something happened to the horse was not terribly difficult. The same soldier rode and cared for the same horse all the time. So it would be easy to tell if someone was systematically abusing their mounts--they would have a higher injury or death rate as compared to the others in their brigade.

The Army chose to have the officers buy their own mounts to circumvent the principal- agent problem involving the use of public animals. In this case the rider had a much higher incentive to keep the animal healthy as he was the residual claimant. The question automatically arises: why did the army not ask the enlisted men to buy their own cavalry horses? This would seemingly eliminate the agency problem regarding riding animals completely. The differential treatment may have to do with ease in monitoring enlisted men versus officers. It seems clear that in the military setting the enlisted men act as agents and the officers as the monitors, and to some degree principals. So, the officers can watch over the treatment and use of horses by the enlisted men, but who monitors the monitors? While each officer has a superior as his monitor, he may not be consistently surveying the use of the animals used by an officer, whereas the enlisted men would presumably be monitored more closely. This may explain the practice of having officers buy their own horses, such that monitoring monitors was not necessary.

The use of horses to pull artillery pieces could be explained with the same argument applied to using horses for cavalry duty. Many of the animals used to pull artillery pieces were simultaneously ridden. And since most were familiar with riding horses before joining the army, their use in the army would reduce the cost in training soldiers.

Nearly all forts and outposts used horses for cavalry duty, horses for officers to buy and horses to pull artillery. It thus seems that for riding purposes the horse had a comparative advantage over the mule. But, for draft work the story is different. Certain installations tended to use the horse as the primary draft animal, whereas others used the mule. Still, others would use nearly equal numbers of both. Why this peculiar division of draft animals when the use of horses for riding seems so clear?

The precise similarities and differences between horses and mules are important in the decisions of which type of animal to use. As I have previously argued (Kauffman 1993c), both horses and mules are pound for pound equally productive at pulling, the differences lay more in their ability or inability to resist injury and abuse. Because mules are a hybrid cross between a donkey and a horse, they exhibit qualities not possessed by either of the parent subjects. The trait of most interest here is their innate ability to resist injury and abuse that may cause them harm. Horses, however, do not possess such acute innate qualities of self-preservation.

So what was the deciding factor for each of these forts in their choice of which type of draft animal to use? With a scarce amount of resources with which to procure supplies the army would like to minimize its costs whenever it could. I argue the mules that were purchased were issued to forts and outposts with the most severe agency problems. The more severe the agency problem, all else equal, the more likely mules should have been used to abate the effects.

Before going about testing the behavior of the Army, it should be established that there actually were agency problems regarding the use of animals in the US Army. In discussing this problem M. C. Meigs, the Quartermaster General of the US Army reported that, "the consumption of horses has been very great. Mules bear the exposure and hardship of the campaign much better than horses, and they are used to a great extent in the trains" (Report of the Quartermaster General 1863, p.72). He further went on to say that "ignorance and carelessness of raw soldiers waste our horses" (p.72). The abuse of army animals was still a problem by the end of the Civil War. According to the Quartermaster General, "the waste in active service [horses] is still too great; but as the cavalry has improved in discipline and knowledge, it is believed that the horses last longer" (Report of the Quartermaster General, 1865, p.133). Therefore, it is fair to say that there was a problem with issuing horses to its soldiers. The horse's lack of resistance to abuse coupled with the fact that those using the animals were not the residual claimants resulted in an agency problem that ultimately meant the loss of many US Army horses.

III. Principal-Agent Problems in the US Army

To measure the severity of the agency problem in the use of draft animals by the US Army, we must lay out clearly the relevant parties in the relationship. The agents were the enlisted men as they were the ones actually working the draft animals. The animals were not owned by them and if anything happened to these animals it would be difficult to assign blame. The principals were the owners or the American people; they wanted to preserve the capital value of these animals and keep the cost of military spending as low as possible. Those charged with seeing that the principal's wishes were carried out were the officers; so in this sense they were the monitors. Their role as monitors of the use of public owned animals was clearly laid out in an 1863 directive stating that, "it is the design of the War Department to correct such neglects [ill treatment of public animals], by dismissing from service officers whose inefficiency and inattention result in the deterioration or loss of the public animals under their charge" (General orders No. 236, 1863). Therefore, the role of the officer as the monitor of the use of horses and mules against abuse was clearly stated.

The severity of the agency problem varied across each fort, outpost, division or brigade owing to the relative number of enlisted men to officers. In certain cases the number of enlisted men to officers was equal, hence the agency problem was very low. In others, like the Army of the Potomac, the enlisted men out numbered the officers 50 to 1. It was in cases such as this where the ratio of enlisted men to officers, or agents to monitors, was high that we would expect the Army to use the more expensive, yet abuse resistant mule. If the army worked as a rational economic agent, as in the cases of southern agriculture and mining, we would expect them to use the less expensive horse in cases where the agency problem was less severe and the mule in cases where the agency problem was more severe.

The test of this hypothesis uses data collected from the "Report of the Means of Transportation, Number of Officers, Men, Animals, &c." This monthly report, which was in existence from 1840-1870, was to be sent to the Quartermaster General in Washington by the local Quartermaster of each army corps or outpost. Unfortunately, only 486 of the actual reports survive and only for the years 1863-1866; the rest were destroyed. Yet, the remaining reports should represent an unbiased sample of the relative proportions of draft horses and draft mules within the US Army.

Because this report enumerated the numbers of officers and enlisted men as well as the number of animals at each site, the direct question of how and why particular types of work stock were issued can be addressed. The numbers of enlisted men and officers varied considerably with the mean number of enlisted men at 7026 and officers at 326. Thus the average ratio of enlisted men to officers was nearly 22 to 1. The absolute number of draft mules was quite high at 1831, while the average number of horses was 410. This resulted in a mule to horse ratio of over 4 to 1. So while the relative level of enlisted men to officers was seemingly high, so too was the average ratio of mules to horses.

It will prove useful to separate the reports by the number of enlisted men at each installation as a way of measuring size. In doing this it is clear that the smallest installations, those with under 100 enlisted men, had the highest ratio of officers to enlisted men. It is therefore not surprising that this same category had the highest ratio of horses to mules. In fact it is the only one in which this ratio was greater than one. The next two smallest categories also have the next highest ratios of officers to enlisted men and consequently had the next two highest horse to mule ratios.

As the number of enlisted men per installation becomes larger, over 1500, the ratio of officers to enlisted men does not vary much. Presumably, however, as the shear number of enlisted men grows the difficulty in monitoring them would increase. This is evident from the fact that above the 3000 enlisted men per installation level, the ratio of horses to mules never gets above 27 horses for each 100 mules.

To test whether mules were issued in situations of more severe agency problems and horses in less severe cases, the severity of the agency problem in each case must be measured. To do this the number of enlisted men as a percentage of all soldiers was calculated for all 486 reports. The higher the number of enlisted men as a percentage of both enlisted men and officers, the greater the agency problem. In other words, the higher the percentage of enlisted men at an installation, necessarily meant there was a smaller percentage of officers to monitor them. Therefore, we would expect that the higher the percentage of enlisted men, the higher the percentage of mules should be used for draft work. The following Ordinary Least Squares (OLS) regression was estimated with the percentage of mules as a dependent variable and percentage of enlisted men as a regressor:

PercentMule = -0.045 + 0.834 Percent Enlisted (1)

with t-statistics of 3.54 for the constant and 53.39 for percent enlisted, R2 = 0.58.

The results of this regression strongly suggest the economic rationale for mule use was to abate agency problems. In situations where the percentage of enlisted men was high, so too was the percentage of mules used. For example an increase in the percentage of enlisted men at a particular installation of 10 percentage points resulted in an 8.34 percentage point increase in mule use. This single regressor is highly significant, both economically and statistically, and this simple model explains nearly sixty percent of the variation in mule use by the Army.

IV. Conclusion

It generally has been accepted that army procurement was, and still is somehow irrational. The exorbitant prices paid for some equipment causes many to believe that this institution does not base its purchasing decisions on solid economic judgements.

Were the procurement and distribution practices of the US Army during this period irrational? At least with respect to draft animals it appears not. Data from the Report of the Means of Transportation suggest that at installations where there were relatively few officers watching over the enlisted men using these animals, the draft animal of choice was the more expensive, yet more abuse resistant mule. This was done to diminish the amount of capital depreciation on the overall draft animal stock of the US Army. Whereas at smaller installations where the proportion of officers to enlisted men was higher, hence easier monitoring, the army could issue the less expensive horse.

This one example of army procurement could shed additional light on other such seemingly irrational procurements by the Army. As this exercise suggests the Army could, in certain instances, be spending more on certain purchases which are more abuse resistant--a desirable characteristic considering the endemic agency problems found in the army--than would individual consumers where such agency problems are not as pronounced. If Senator Proxmire would have been doling out "Golden Fleece Awards" in the 19th century; one given for purchasing mules rather than just horses at army installations would have been na•ve.