Making Consumers Comfortable: The Early Decades of Air Conditioning in the United

States
Author(s): Jeff E. Biddle
Source: The Journal of Economic History , DECEMBER 2011, Vol. 71, No. 4 (DECEMBER
2011), pp. 1078-1094
Published by: Cambridge University Press on behalf of the Economic History
Association

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 Making Consumers Comfortable:
The Early Decades of Air Conditioning in
the United States

Jeff E. Biddle

During the air conditioner industry's first four decades, most installations
were "commercial comfort" air conditioning systems, purchased by retailers to
increase demand for their products. Air conditioning spread unevenly through the
commercial sector and across the country. Using data from a variety of sources,
I offer a quantitative account of this diffusion, viewed through an interpretive
framework that emphasizes differences across geographic markets and industries
in the costs and benefits to retailers of installing air conditioning. Correlates of
early adoption of commercial air conditioning include electricity rates and
consumer income and education levels.

Going adoption,
adoption, back economists
economists at least to understand
have attempted have Zvi attempted Grilliches' to understand studies of the hybrid diffusion corn
the diffusion
of technological innovations as the aggregate outcome of individuals'
calculations of the costs and benefits of adopting the new technology.
Case studies of new technology diffusion have focused both on
firms' decisions to adopt efficiency-enhancing innovations to their
production processes based on cost considerations, and consumers'
decisions to adopt new products based on utility considerations.1
This article examines the interesting case of the diffusion of air
conditioning, which for its early adopters combined features of process
and product innovations. These early adopters were retailers of
goods and services, such as owners of movie theaters and department
stores, who installed "commercial comfort" air conditioning systems in
hopes of attracting more customers. Thus, like a process innovation, the
diffusion of air conditioning was chiefly driven by the decisions of
firms. The technology itself, however, mainly altered the service a firm
produced rather than its production process, so that the impact of the

The Journal of Economic History , Vol. 71, No. 4 (December 201 1). © The Economic History
Association. All rights reserved, doi: 1 0.1 01 7/S002205071 1002257.
Jeff E. Biddle is Professor, Department of Economics, Michigan State University, East
Lansing, MI 48823. E-mail: biddle@msu.edu.
I would like to thank Larry Martin, seminar participants at the Universities of Michigan and
Notre Dame, and two anonymous referees for helpful comments on earlier drafts. I would also
like to acknowledge the able research assistance of Jeb Biddle, David Carlson, Dan Fitzpatrick,
Young Gui Kim, and Yi Zhu.
1 Hall, "Innovation and Diffusion," provides a good introduction to this literature.

1078

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 Making Consumers Comfortable 1079

technology on consumer utility was a major factor affecting its spread,

an impact which could be very different in different retail sectors.
The crucial role of commercial applications in the diffusion of
air conditioning has been documented by Gail Cooper and Marsha
Ackermann.2 I add to these accounts by offering a more quantitative
picture, using a previously unexploited data source: A 1940 survey
by the Edison Electric Institute (EEI) of over 180 electric utilities that
solicited information on air conditioning installations in the utilities'
service areas. I also draw on information reported in trade journals of
the period. This evidence indicates that the early spread of commercial
air conditioning was uneven, varying both geographically and across
industry. For example, by the eve of World War II, the majority of
movie theaters and over a third of chain drug store outlets were air
conditioned, while air conditioning was still rare in grocery stores
and beauty shops. By the 1950s the prevalence of air conditioning
had increased in all these lines of business, but the interindustry
differentials remained.
I offer an interpretation of these patterns grounded in economic logic:
The geographic markets and lines of business in which air conditioning
was adopted earliest and spread the fastest were the ones in which
the benefits of adopting air conditioning were highest relative to the
costs. In keeping with this interpretation, regressions using the EEI data
show that as of 1940 commercial air conditioning was more prevalent
in markets with lower electricity rates, more affluent and educated
consumers, and lower interest rates. The retail sectors that were
the earliest and most enthusiastic adopters of air conditioning were
often those in which air conditioning would have been expected to
significantly boost revenues due to the nature of the good or service
sold. Several of the early adopting sectors were plagued with significant
summer declines in demand that became smaller during the period of
air conditioning's diffusion.

Historical Overview

In the first two decades of the twentieth century, Stuart Cramer

and Willis Carrier patented devices to control indoor temperature
and humidity and sold their "air conditioning" systems to firms that
worked with humidity-sensitive materials, including textiles, tobacco,
and gunpowder.3 These sorts of applications, designed to improve
the efficiency of production processes, were dubbed "process" air

2 Cooper, Air Conditioning America; and Ackerman, Cool Comfort.

Cooper, Air Conditioning America, pp. 17-50.

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 1 080 Biddle

conditioning, to distinguish t
which was designed to control
comfort. Comfort air conditi
not begin to become importa
market for commercial comf
those purchased by owners of
customers - soon eclipsed the
1940 almost 90 percent of th
devoted to commercial comfort
Movie theaters provided the
conditioning. Crowded theat
as outside temperatures rose,
products that promised to fi
season. During the twenties a
the norm in the nation's larger
149 of 256 movie theaters h
cooling about 75 percent of Ch
Department stores provided
conditioning. As Ackermann
the 1920s was "not a chore, bu
less entertaining if the store
sales plummeted in July and
the first store to install air con
in Boston and Manhattan soon followed suit.
During the 1930s other branches of retailing followed the lead of the
department stores. In 1939 the trade journal Chain Store Age surveyed
over 300 retail chains operating tens of thousands of outlets. The
highest percentage of air conditioned outlets was reported by the
drug store/soda fountain chains, at 29.7 percent. This was followed
by restaurants at 21.3 percent, and shoe and apparel chains in the
mid-teens. Overall, 9 percent of the chain outlets were air conditioned,
a figure that would rise to 10.5 percent on the eve of World War II.9
The postwar period saw a boom in commercial air conditioning. The
chains surveyed by Chain Store Age in 1949 reported that 18.5 percent
of their stores were air conditioned, and by 1954 the figure was up to 35
percent.10 Office buildings and hotels became important new customers

4 Biddle, "Explaining the Spread."

5 Cooper, Air Conditioning America, p. 81.
This is based on the 1940 Edison Electric Institute survey of utilities, discussed in more
detail below.
7 Porter and Rock, "Estimating the Potential Market," p. 9.
8 Ackerman, Cool Comfort , pp. 52, 56.
9 Chain Store Age, Nov. 1939, p. 101 and Nov. 1941, p. 96.
10 Heating, Piping, and Air Conditioning, March 1950, p. 70 and August 1955, p. 82.

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 Making Consumers Comfortable 1081

for the air conditioning industry. Periodic surveys of major office

buildings in the United States and Canada reported air conditioning
in 10 percent of sample buildings in 1941, 16 percent in 1951, and 30
percent by 195 5. 11 The air conditioning of hotels followed a similar
pattern. As of 1937 only 0.5 percent of the rooms of larger hotels
nationwide were air conditioned, and only 10 percent of their public
spaces.12 A boom in the construction of new hotels in the 1950s fueled
the spread of hotel air conditioning, and by the early 1960s over 60
percent of all hotels and motels had at least some air conditioning.13

Economic Framework

Consider a model in which firms in a retail industry are operating in a

zero profit, monopolistically competitive equilibrium. A new technology
is introduced with the potential to increase revenue by enhancing the
value to consumers of the industry's product.14 If this revenue increase
exceeds the cost of adopting the technology, firms in the industry will
adopt it. In the long run, there will be increased demand for the industry's
product, entry of additional firms, and a new zero-profit equilibrium.
However, there is also a medium-run equilibrium in which all incumbent
firms have adopted the technology and are earning quasi-rents, but new
firms have not yet entered. I hypothesize that markets and retail sectors in
which these quasi-rents were likely to have been higher will be those in
which air conditioning was adopted earlier.
To be more specific, we should expect to see early adoption and
diffusion of air conditioning in retail industries and in markets in which
the expected increase in demand due to the adoption of air conditioning
was likely to be higher, and the cost of the technology lower. The
demand boost that retailers could have expected following the adoption
of air conditioning would have varied across lines of business and
geographic markets in ways related to observable features of those
businesses and markets. First, the consumption of many types of goods

11 Ibid., June 1957, p. 132.

12 Ibid. March 1937, p. 101.
13 Ibid., March 1956, p. 121 and Jan. 1964, p. 121. As of 1960 the industrial air conditioning
market remained small. In 1963 sales to the entire industrial market were about the same as
sales to hotels and motels.
14 Details of this model, a modification of the model in Salop, "Monopolistic Competition,"
are in Biddle, "Early Decades"; here I summarize its implications. Narrative evidence supports
the monopolistic competition assumption that the firms whose decisions about air conditioning
are the subject of this article were active competitors who perceived a downward sloping
demand for their product. The one implication of the monopolistic competition model that does
not arise in a similar model assuming perfect competition is a direct relationship between the
thickness of a retail market and the prevalence of commercial air conditioning.

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 1082 Biddle

requires the consumer to

time which could be unplea
spent on site consuming
conditioning would have
offering. Second, if the g
necessity, consumers cou
the hot retail establishmen
purchase or substitute a l
retailers would see deman
more serious problem for
perishable, such as a seat at
equal, the potential benefi
greater in hotter climates.
increase in demand broug
larger impact on profits in
in more densely populated m
On the cost side, the mos
cost of adopting air condit
according to trade publicatio
percent of the total operatin
rate would have made it mo
a system. If we assume that
cost of installing air condit
literature, while operating
of air conditioning per un
establishment size.15
Narrative evidence from
characterization of the pr
through various industries
conditioning in an attempt t
serving the same market to
the retail drug field wrote t
stores:

The druggist is reasonably quick and willing to respond to any devices which
will increase his business. He is accustomed to lively competition, for not only
does he vie with other drug stores - and there are always plenty of them - but
he competes with restaurants through his soda fountain and general stores
with much of his other merchandise. His interest then, in air conditioning as a
weapon to fight competition, build his business, add customers, and boost sales
volume is genuine ....

15 Healing, Piping, and Air Conditioning, Dec. 1938, p. 736.

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 Making Consumers Comfortable 1083

The trend in air conditioning in the drug field shows . . . that the first
installations are made by large chain store units, followed later by large local
chains, then large independent stores, working down gradually towards the small
neighborhood retailer . . . ,"16

The same themes are repeated in descriptions of the adoption of air

conditioning in other lines of business:

With so much capital invested in their theaters, exhibitors could not afford
a drop in attendance during the summer. Air conditioning would draw in
crowds and so defeat the traditional summer downturn . . . The appearance of
air conditioning in a theater belonging to a national chain could spark its rapid
adoption at a local level, fueled by the intense rivalry of exhibitors.17

There have been many instances in which the installation of air conditioning in
one hotel in a community has forced other hotels in the same city to do likewise;
in fact, every time we made another air conditioning installation in one
particular hotel we were operating, our principal competitor duplicated it. . . .'8

Of course, accounts from an air conditioning industry trade journal

would be expected to exaggerate the business benefits of installing the
industry's product, but it seems likely that they have some factual basis.

Geographical Variation in Air Conditioning Prevalence

The model just described provides a basis for regression analysis

explaining differences in the prevalence of commercial air conditioning
across geographic markets in the United States at the end of the 1939.
The air conditioning prevalence data come from a survey conducted
by the Edison Electric Institute (EEI), a trade organization for privately
owned electric utilities. In 1940 EEI surveyed utilities concerning
the air conditioning installations in their service areas. Respondents
were asked to classify commercial installations by the type of business
making the installation. Over 180 utilities answered the 1940 survey,
providing information on number of installations and horsepower
installed. I approximated the 1939 service area for most of the utilities
in the EEI survey, and then matched Census and Federal Power
Commission (FPC) data to utilities on the basis of these approximate
service areas.19 The result is a data set with 132 observations, with

16 Jensen, "What Air Conditioning Means," p. 48.

17 Cooper, Air Conditioning America, pp. 90-91.
18 Lewis, "Hotel Air Conditioning," p. 345.
To estimate a utility's service area, I consulted that utility's listing in the FPC Directory of
Electric Utilities for Г940, which reported the number of electrical customers of the utility
and all communities with population over 250 served by the utility. Utilities that served a
single community were matched to census data for that community. If a utility served several

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 1 084 Biddle

which regressions can be es

installed air conditioning h
businesses in an area and the
of that area. The utilities in
included 66 million people, ab
time, and 70 percent of those
to 56.6 percent of the U.S.
zones of the contiguous Un
coverage also contributes 90
to v
which has a coefficient of variation of 20 percent.
Although commercial air conditioning began to appear in the 1920s,
it remained a novelty outside of movie theaters until the mid to late
1930s. Starting in 1934 EEI conducted several smaller air conditioning
surveys, and for 16 of the utilities included in the 1940 EEI survey, one
can construct consistent times series for the amount of commercial
air conditioning going back to 1935. At the end of 1935 there were
2,322 commercial air conditioning systems installed in these areas.
The number of systems had increased by a factor of 2.5 by the end of
1937, and from then until the end of 1939 the number increased
another 77 percent, such that there was one system for every 20 retail
establishments.21 The expansion from 1935 to 1940 implies that air
conditioning in the United States went from being something rarely
encountered by consumers to an economically significant though
still somewhat unusual feature of the retail scene. Thus, while the
cross-section regressions reveal the characteristics of markets in which
more commercial air conditioning was installed as of 1940, they
also identify the characteristics of markets in which commercial air
conditioning spread most quickly in the early years of its diffusion.

communities, all counties for which the population of communities it served was greater
than the population of communities it did not serve would be designated as part of the
utility's service area. This approximated service area could sometimes be improved by adding
a substantially sized city served by the utility but in a county not dominated by the utility, or
subtracting a city not served by the utility in a county it otherwise dominated. In ten cases, a
"utility" in the data set represents a combination of two, three, or four utilities because the
approximated area served by the utilities in combination could be estimated more accurately
than the service area for any of the individual utilities. In these cases, the rate variables
used were averages of the rates reported for the constituent utilities, weighted by number of
customers served by each utility. Further details on the EEI data and the assignment of service
areas and variables to utilities is found in Biddle, "Early Decades."
20 Emmons, "Franklin D. Roosevelt," identifies factors that led to rate variation across utilities
during this period, including differences across states in tax and regulation policy and differences
among utilities in access to hydroelectric power, and the distribution across space of customers
(which affected transmission costs).
21 Pre- 193 8 installation data for the sample of 16 utilities is reported in Heating, Piping, and
Air Conditioning , Jan. 1937, pp. 32-33; Jan. 1938, pp. 26-28 and Jan. 1939, pp. 33-34.

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 Making Consumers Comfortable 1085

Column 1 of Table 1 reports the results of a regression in which the

dependent variable is horsepower per capita, defined as air conditioning
horsepower installed by all commercial retail establishments in the
utility's service area at the close of 1940, divided by the service area's
1940 population.22 Several independent variables are included in the
analysis. The natural log of the median value of family wage and salary
income for families in which all earners are wage and salary workers,
calculated from the 1940 Census public use microdata, is included
to control for the effect of consumer income on the derived demand
for commercial air conditioning. The log of the electricity rate
(an average of 1935 and 1937 commercial electricity rates for the
utility) based on data from the FPC, measures the power cost of air
conditioning.24 The bank lending rate in the service area in 1940, based
on Howard Bodenhorn's data, reflects the capital cost of installation.25
Population density from the 1940 Census measures the thickness of the
market in the area. The area's average annual number of heating and
cooling degree days measures the severity of an area's winters and
summers, respectively. An interaction term between the heating and
cooling days is included to examine whether the impact of summer heat
on the demand for air conditioning was greater in climates with
colder winters.26 The percentage of those over 25 in the service area
who graduated from high school helps capture differences in permanent
income and schooling-related tastes across service areas. The rate of
employment growth between 1930 and 1940 controls for possible bias
due to correlation between the rate of economic growth in a utility's
service area and its electricity rate. Finally, dummies are added for the
four census regions to capture cost of living differences and other
regional factors.
The results of this regression in Table 1 indicate that places with hotter
summers had significantly more commercial air conditioning installed as
of 1940. Other things equal, a one-standard-deviation increase in summer
heat is associated with about a one standard deviation increase in air
conditioning horsepower per capita. The estimates imply that if Chicago
had the climate of St. Louis, it would have had 30 percent more
commercial air conditioning horsepower at the end of 1939 than it
actually did.

22 I define total commercial retail horsepower as the sum of horsepower for barber/beauty
shops, clubs, funeral homes, hotels, recreation centers, restaurants, stores, theaters, and an "other
commercial" category.
23 Census data comes from Ruggles et al., Integrated Public Use Microdata.
24 Federal Power Commission, Electric Rate Survey and Typical Net Monthly Bills.
25 Bodenhorn, "More Perfect Union."
Average heating and cooling degree days for various areas are reported by the National
Oceanic and Atmospheric Administration. See Biddle, "Early Decades," for details.

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 1 086 Biddle

Table 1
FACTORS AFFECTING DIFFERENCES ACROSS GEOGRAPHIC MARKETS IN THE
PREVALENCE OF COMMERCIAL AIR CONDITIONING, 1940

Dependent Variable:
Horsepower per Capita

Independent Variables All Commercial3 Movie Theaters Restaurants

(mean = .006) (mean = .0018) (mean = .0007)

Log income 0.0113** 0.0024** 0.0007

[mean income = 1 ,206.6, sd = 348.7] (0.00 1 8) (0.0009) (0.0004)

Income elasticity 1.89 1.34 0.90

Log electricity rate -0.0053** -0.0028** -0.0001

[mean rate = 20.8, sd = 3.9] (0.0020) (0.0009) (0.0003)

Rate elasticity -.95 -1.64 -0.14

Population density -0.0000 -0.0000 0.0000

[mean=1608, sd=44,020] (0.0000) (0.0000) (0.0000)

Establishment size
[Restaurant employees: mean = 3.51, sd = 1.56] 0.0011+ 0.0002**
[Theater seats in 000s: mean = 0.837, sd = 0.330] (0.0006) (0.000 1 )

Heating degree days (000s) -0.0005 -0.0001 -0.0001

[mean = 4.95, sd = 1 .94] (0.0004) (0.000 1 ) (0.000 1 )

Cooling degree days (000s) 0.0047** 0.0012** 0.0003

[mean = 1 .27, sd = 0.82] (0.00 1 1 ) (0.0003) (0.0002)

Heating X cooling degree days 0.0008* 0.0002 0.0001

(0.0003) (0.0001) (0.0001)

% High school 0.0270** 0.0027 0.0026*

[mean = .26, sd = 0.07] (0.0058) (0.0025) (0.00 1 1 )

Interest rateb -0.0016* -0.0004+ -0.0001

[mean = 4.49, sd = .85] (0.0007) (0.0002) (0.000 1 )

Employment growth, 1930-1940 -0.0126* -0.0025+ -0.0008

[mean = -0.064, sd = 0.1 07] (0.0045) (0.0015) (0.0008)

/^-squared 0.63 0.55 0.48

+ Statistically significant at the 10 per
* Statistically significant at the 5 perce
** Statistically significant at the 1 perc
a Includes horsepower reported for t
hotels, recreation, clubs, restaurants, d
theaters, and other commercial.
bFor state in which majority of the uti
Notes'. Sample consists of 132 utility
census regions. Robust standard errors ar

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 Making Consumers Comfortable 1087
Table 1 - continued
Sources : Electricity rates for a billing demand of 3 kilowatts and a monthly consumption
level of 375 kWh in 1935 and 1937 are taken from Federal Power Commission (1936, 1937).
Average bank lending rates by state are from Bodenhorn, "More Perfect Union." Median
family wage and salary income for families in which all earners are wage and salary
workers, calculated from the 1940 Census public using microdata aggregated to the state
economic area (Ruggles et. al., Integrated Pubic Use Microdata Series). The 1940 Employment
Growth, Percentage of High School Graduates, and Population Density are from the
1940 Census. For utilities serving one city, annual average heating and cooling degree
day values for the weather station closest to that city are taken from the National
Oceanic and Atmospheric Administration, Annual Degree Days to Selected Bases
(http://hurricane.ncdc.noaa.gov/climatenormals/clim8 l_supp/CLIM8 l_Sup_02.dat).
Utilities serving larger areas were assigned weighted averages of degree days values for
substate "climate divisions" as reported in the National Oceanic and Atmospheric
Administration, Divisional Normals and Standard Deviations of Temperature,
Precipitation, and Heating and Cooling Degree Days, 1 97 1-2000, accessed at
http://cdo.ncdc.noaa.gov/climatenormals/clim85/CLIM85_HDD03.pdf. See the text for the
method of imputing establishment size. Further details on variable construction are in Biddle,
"Early Decades."

Retailers installed more air conditioning in areas with higher family

incomes and more educated residents, with an implied income elasticity
of 1.89. Differences across areas in the electricity rate were
significantly associated with differences in installed horsepower, with
an implied elasticity of -0.95. Given that electricity made up only about
half of the operating cost of air conditioning, this suggests considerable
cost sensitivity on the part of retailers contemplating the decision
to adopt. The bank lending rate is also negatively related to installed
horsepower. The amount of air conditioning in a market was not
significantly related to the population density of the market.
The net benefit of installing air conditioning would have been greater
for larger retail establishments, implying that other things equal, areas
in which the average retail establishment was larger would have
had more commercial air conditioning. Because of the heterogeneity of
firm types included in the aggregate commercial retail category, no
establishment size variable was included in the column 1 regression.
The final two columns of Table 1 report results of regressions for
horsepower per capita in movie theaters and restaurants, business types
for which meaningful establishment size variables can be constructed.
Establishment size is measured by employees per establishment in
the restaurant regressions, and seats per theater in the movie theater
regression.27 The coefficient on establishment size is statistically

27 County-level values for these variables were imputed. Using state and large city-level
information from the 1 940 Census of Business, regressions were run of restaurant employment
on the log of ((restaurant sales/total retail sales) X (retail employment)) and the percent of the
population in urban areas with an r-square of .99. Regressions were also run of the log of

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 1088 Biddle

Figure 1
PREVALENCE OF AIR CONDITIONING IN VARIOUS TYPES OF RETAIL CHAINS

Sources'. November issues of Chain Store Age (1939, p. 101; 1940, pp. 98-99; and 1941, pp.
96-97) report figures on percentage of all outlets currently air conditioned for chain stores.
Figures from 1949 to 1954 are based on results of annual cross-section surveys reported in the
February issues of 1954 and 1955. Further details are in Biddle, "Early Decades."

significant in both regressions, indicating that a one-standard-deviation

increase in the size of the average theater is associated with a 20 percent
increase in theater air conditioning, while a one-standard-deviation
increase in restaurant size is associated with a 45 percent increase in
restaurant air conditioning.
The regressions results are thus consistent with the view that several
key determinants of where air conditioning was more or less prevalent
at the close of the thirties are logically linked to the profit maximizing
decisions of firms in the commercial sector. However, concerns with
possible omitted variables make it unwise to give a causal interpretation
to the estimated coefficients in the Table 1 regressions.28

Differences Across Retail Industries in the Early Adoption of Air Conditioning

By all accounts, the motion picture exhibition industry was the first
to embrace comfort air conditioning as a means to higher profits, and
the first in which adoption of air conditioning approached saturation
levels. Some evidence on the timing of adoption in other retail and
service industries is presented in Figure 1, which shows the growth in the

the number of theaters and the log of the number of theater seats on the log of population,
the percent of the population in urban areas, and the logs of per capita retail sales and the ratio of
payroll to employees in the service sector. Ä-squares for these regressions were .94 and .98.
28 Biddle, "Early Decades," shows that the basic pattern of results reported in Table 1 is robust
to a number of alternative specifications of the regression.

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 Making Consumers Comfortable 1089

percentage of chain store outlets with air conditioning in a

number of retail lines, based on surveys conducted by Chain Store Age
between 1938 and 1954. In the late 1930s drug store/soda fountain chains
were the most eager adopters of air conditioning, while there was almost
no air conditioning in grocery stores. Clothing stores, shoe stores, and
restaurants were more likely to have air conditioning than department and
variety stores, a group which includes everything from small 5 & 10 cent
outlets to major urban department stores. While the prevalence of air
conditioning increased considerably over the period for all these types of
chains, there were no significant changes in the ordering from most air
conditioned type to least. In the prewar years, Chain Store Age also
reported figures for an "other" category, which included automotive
accessory and hardware stores, confectionary stores, and retail
bakeries, and the percentage of these outlets air conditioned was close
to that of grocery outlets. In 1954 the magazine reported that 14 percent
of the outlets of automobile accessory or hardware chains were air
conditioned, which was about half the level reported for grocery stores.
Based on Figure 1 and the narrative evidence discussed earlier, it
appears that after the movie theaters, the order in which different retail
sectors adopted air conditioning corresponds to the ranking of sectors in
air conditioning prevalence as of 1940. Drug stores air conditioned first,
followed by restaurants and department stores/variety stores, followed by
grocery stores, then hardware stores, auto parts stores, and most other
types of retail stores and service providers not separately counted in the
EEI or Chain Store Age surveys. 9 This ordering is consistent with the
argument that time necessarily spent in the retail establishment by the
consumer and the potential for seasonal swings in demand were important
factors in retailers' decisions to adopt air conditioning. Movie theaters
adopted first because watching a movie required spending a long period of
time in a crowded room, and the quality of this consumption experience
declined rapidly as the outdoor temperature rose. Seasonality was an issue
because the consumer could easily shift the timing of a visit and in
the summer had many other alternatives. Such large seasonal swings
in demand could be particularly problematic for urban exhibitors, for
whom other considerations favored the building of large theaters,
making fixed costs high. According to Ackerman, air conditioning
completely eliminated the summer drop in sales, and may have turned
summer into the peak season for movie theaters.30

29 Additional support for this ranking of sectors is provided by an analysis of air conditioning
prevalence in 1939 and in 1948 across retail lines of business in several major cities, described
in Biddle, "Early Decades."
30 Cooper, Air Conditioning America, pp. 85-87; and Ackerman, Cool Comfort , p. 58.

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 1 090 Biddle

For similar reasons, the po

conditioning was large. Eati
as well as money, a restaura
consumer who can eat at ho
restaurant seats, like theater
seller's point of view. Drug
even more than restaurants f
difference between drug store
service. One enters a restauran
When one enters a drug store
food items, but if the interior

Inair conditioned drug stores, the f

greatest extent .... (W)here a soft d
with a malted milk replaces it. The
1 :30, extends, after the store is air co

Verda Jensen noted that the d

the functions of a restaurant an
benefit from air conditioning:

Customers drop in the store to pur

relief that they linger to shop aro
receptive and in no hurry to leave th
they would have walked out on befor

Like drug stores, departmen

that were not necessities, and
bought more when they spent
stores also stood to benefit f
to spend time in the store tr
hand, owners of grocery, h
adopters of air conditioning b
could not be long postponed
stores were also usually motiv
not an important phenomenon.
An objective measure of the
have stimulated a profitable boo
provided by the seasonal pattern
the period that air conditio
monthly retail sales time serie
to the introduction of air co

31 Jensen, "What Air Conditioning Mean

32 Idem.

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 Making Consumers Comfortable 1091

typically about 24 percent below average during July and August. As air
conditioning diffused, however, this summer sales decline fell to only
about 14 percent by the 1952-1959 period. Shoe stores also follow this
pattern, with an average summer decline of 13 percent in the pre-air
conditioning years, but only 9 percent by the 1950s. A short monthly
sales series for women's apparel stores shows a sharp July-August sales
decrease in the late 1940s that diminishes by a statistically significant 1
percentage point per year over the next decade. Variety store owners
faced a hot weather sales drop, but it did not decline during the period
of diffusion of air conditioning. Grocery stores did not experience sales
drops in the summer months during the 1919-1951 period, consistent with
the characteristics of grocery store demand discussed above. However,
the data for restaurants and drug stores show only small summer sales
declines in the pre-air conditioning period.

Accounting for the Rising Prevalence of Commercial Air Conditioning, 1935-1954

Underlying the differences across geographic areas and types of retail

business in the prevalence of air conditioning at various points in time was
a significant general increase in the use of air commercial conditioning
between 1935 and 1955. By the end of the period, air conditioning was
becoming common in retail industries that earlier had made little or no use
of it. One factor that might have contributed to this general growth was a
decline over time in the cost of air conditioning. Although the cost of
installing air conditioning did not decline, operating costs in 1982-1984
dollars halved from over 12 cents per kilowatt hour in the late 1930s
to about 6 cents in the early 1950s.34 As electricity cost represented at
least 40 percent of the total operating cost of air conditioning, one can
conservatively estimate that this electricity rate decline led to a 25 percent
fall in operating costs.
If the electricity rate elasticity estimated in column 1 of Table 1
measures the causal impact of changes in electricity rates on the demand
for commercial air conditioning, the substantial decline in electricity rates
between 1939 and 1954 was likely an important factor driving the growth
of commercial air conditioning over the same period. As noted above,
the percentage of all chain store outlets air conditioned rose from 8.2
percent to 35 percent between 1939 and 1954. Assuming an electricity
rate elasticity of-1, the fall in electricity rates over that period arguably
explained 6.5 percentage points of that increase.35

33 Details of this analysis are in Biddle, "Early Decades."

34 Biddle, "Early Decades"; and Federal Power Commission, Statistics.
35 Rates fell from about 12 to 8 cents between 1939 and 1946, or a 40 percent decline using the
midpoint as a base. Multiplying 8.2 by 1.4 predicts a prevalence of 11.5 percent by 1946. From

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 1092 Biddle

Consumer incomes were

education levels, both trend
have increased the derived d
example, real disposable pers
between 1940 and 1945, an
and 1955. If the income elas
these increases alone coul
increase in chain store air con
Calculations of this sort ar
interpretations of the cross
assume that the changes ove
exogenous to increasing air
considered. They are best
about the forces behind the s
worth testing further should

SUMMARY AND CONCLUSIONS

For the first four decades of the air conditioning industry in the United
States, the story of the diffusion of air conditioning was largely the story
of its gradual adoption by firms in the retail and service sectors. It was an
uneven diffusion, both geographically and with respect to business type.
This article has offered a quantitative account of this uneven diffusion,
viewed through an interpretive framework that emphasizes the role of the
costs and potential benefits to retail firms of installing an air conditioning
system.
On the cost side, air conditioning adoption seems to have been sensitive
to the electricity rate and the interest rate, and a large decline in electricity
rates from the mid- 1930s to the mid-1950s likely explains a significant
share of the growth in air conditioning within and across lines of business
over this period. On the demand side, higher incomes and education levels
were associated with more commercial air conditioning in the 1930s,
raising the possibility that increasing income and education levels over
the next two decades might also have helped to drive the general increase
in the use of commercial air conditioning. Evidence was presented that
several retail sectors in which air conditioning was adopted early were

1946 to 1954 rates fell from 8 to 6, or 28 percent. Multiplying 1 1 .5 by 1 .28 predicts a prevalence of
14.7 percent.
36 The increase in the size of the average grocery store between 1935 and 1954 from about 2.4 to
about 4 employees per establishment (as indicated by the Censuses of Business from those years)
might have been a factor contributing to the growth of air conditioning in that sector.

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 Making Consumers Comfortable 1093

plagued by summer sales declines in the early twentieth century, so that

air conditioning provided an attractive means of boosting and smoothing
demand.
Understanding the when and where of commercial air conditioning is
a first step towards understanding the ultimate economic consequences
of air conditioning technology for American economic development. It is
reasonable to suppose that increased labor productivity might have
been one of the effects of the air conditioning of America in the twentieth
century. However, given that most air conditioning in the United States
up to 1960 was commercial comfort air conditioning, it would seem that
the major impact of the technology during this period was to make
certain consumption activities more pleasant than they had been before,
increasing consumer surplus rather than raising physical output per worker
in any obviously measureable way.

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Washington, DC: Smithsonian Institution Press, 2002.
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Accessible at http://econ.msu.edu/faculty/biddle/d
Bodenhorn, Howard. "A More Perfect Union: Regiona
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Markets in the Twentieth Century , edited by M
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Cooper, Gail. Air Conditioning America: Engineers an
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Emmons, William M. III. "Franklin D. Roosevelt, Elec
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Federal Power Commission. Electric Rate Survey
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Cities of 50,000 Population or More: 1937 Rate Se

GPO, 1937.

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Hall, Bronwyn. "Innovation and Diffusion." In Handbook
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Heating, Piping, and Air Conditioning , various dates.
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Air Conditioning (January 1937): 48-50.

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 1094 Biddle

Lewis, Warren D. "Hotel Air Con

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Deviations of Temperature, Precipitation, and

1971-2000. Asheville, NC: National Climate Data Center. Available at
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Porter, Knight C. and Rock, William P. "Estimating the Potential Market for
Commercial Air Conditioning." Heating, Piping and Air Conditioning (March
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Ruggles, Steven, Matthew Sobek, Trent Alexander, Catherine A. Fitch, Ronald Goeken,
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