Doug North

My friend Tawni Hunt Ferrarini told me this morning that Doug North passed away last night. Douglass C. North was, of course, a Nobel Memorial Prize winner in Economics. I first, discovered his work while I was a graduate student in economic history at the London School of Economics in 1984-85. I read “A Framework for Analyzing the State in Economic History” published in a special issue of Explorations in Economic History dedicated to his dissertation adviser M.M. Knight. I still love the way he used such a simple model to think about such a complicated problem. When I decided to go back to graduate school to pursue a Ph.D. in economics, I wanted to study with him. I became his research assistant and he was the chair of my dissertation committee. He was everything I had hoped for as a professor and more than I could have imagined as a human being. I felt like I had won the lottery. I still feel that way.

I wanted to write about what he meant to me, both intellectually and as a friend, but I can’t. Maybe another day I will, but not today. 

Coase on Lighthouses and Economics

Earlier this week Daniel Shestakov noted the publication of a new paper on lighthouses by Erik Lindberg. He and I then had a brief exchange on twitter about whether or not the work since Coase’s (1974) paper had supported or contradicted his contentions. It got me thinking that maybe I had missed something in the more recent work. I went back and looked at some of the papers. I’m still not entirely certain what Shestakov’s position is, but it seemed to me that he was claiming that recent work had supported the theorists rather than Coase. I still don’t see it that way.  Theory suggests that if a good is non-rival and non-excludable that there will be a free rider problem and that the outcome will be inefficient in the sense that it will not maximize the sum of consumer and producer surplus. Coase did not set out to refute the theory. He simply argued that it did not necessarily apply in the case of a commonly used example: the lighthouse. The extent to which a good is non -rival and non-excludable is an empirical question. Coase argued that in some cases lighthouses were not in fact non-excludable. In some cases it is not prohibitively costly to charge the users for the service. It seems to me that recent work has not refuted this claim.

My interpretation of Coase’s paper is that it was really much more about economic methods than it was about lighthouses or public goods. The paper was about the way that economists like Samuelson didn’t bother to study the history of lighthouses before using them as an example of a public good. The primary claim of the paper was that the theory of public goods did not necessarily apply to lighthouses because in some cases it was possible to make the people who used the lighthouse pay for the service provided. Specifically, it was possible to identify which lighthouses a ship had benefited from and charge them accordingly at the time they docked. Coase described the finance and operation of private lighthouses as follows:

It was, for instance, much like a private toll bridge. Coase may actually overstate the extent to which the government set price distinguished the case of lighthouses from most goods. He was clearly aware of the extensive role of government in the provision of lighthouses, and he made no effort to hide this from his readers. Coase, however, characterized the government’s involvement as being not substantially different than the provision of other goods by private companies:

Responses to Coase’s paper seem to fall into two categories.

1.      

Government was extensively involved in the so called private lighthouses. Therefore, the lighthouses were not as private as Coase suggested. It has even suggested that it is ironic that Coase chided other economists for not getting their facts straight and then failed to do so himself.

2.       Coase’s speculation about the relative efficiency of private provision is unsupported by the evidence.

Van Zandt (1993) falls into the first category. Van Zandt, however, does not seem to disagree with Coase’s description of the finance and operation of lighthouses. Instead, he disagrees with the interpretation. His primary argument is that the “public” versus “private” dichotomy is not very useful. Coase seems to have agreed with Van Zandt in so far as Van Zandt notes that Coase suggested that there may be an even wider variety of institutional arrangements than he considers.

Bertrand (2006) agrees with Van Zandt that there was extensive involvement of the government in the so-called private lighthouses. She claims at one point that “We have thus shown that Coase, in his account of the English lighthouse system, underestimates the importance of government, and conversely overestimates the appropriateness of individual initiative (Bertrand 400).” But like Van Zandt she has not actually shown that the lighthouses were financed and operated differently than Coase described. People obtained charters from the government, which set the fees and was sometimes directly involved in the collection of these fees. But Coase said all of that. He never suggested that the government was not at involved. He never even suggested that it was not extensively involved.

Bertrand also argues that Coase overestimated the efficiency of the private lighthouses. The problem here is that Coase’s argument wasn’t about the relative efficiency of the private versus public provision. He did little more than speculate about them in the conclusion of the paper, and suggest that more research needed to be done.

Finally, Lindberg (2015) adds a comparative perspective as well as details about the amount of fees collected. Perhaps, most importantly, I think he moves in the direction originally suggested by Coase. He analyzes the actual lighthouse systems that existed in different places and times to try to understand what might explain the differences in institutional arrangements.

More on economic history

I forgot to add this to the post about new papers on economic history

Ran Abramitzky Economics and the Modern Economic Historian (ungated version here)

economics of open access

The Chronicle of Higher Education has an interesting article on open access publishing. It notes what many open access advocates don't. Publishing, even online, requires resources, which costs money, which some has to provide.

One of the benefits of the traditional publishing model is that the customer, libraries, associations, and individual subscribers, paid. Consequently, journal editors had an incentive to provide a product that people were willing to buy.

In contrast many open access publishers charge a publication fee to the author. Unfortunately, this scheme does not create incentives to publish good papers. The publisher does not get compensated unless they  publish the paper. While there are some legitimate open access publishers that charge a publication fee, many unethical entrepreneurs have stepped into the field to publish anything as long as they get paid. See Beall's list for some sense of how many there are. These publishers have an incentive to publish any crap as long as they get paid because they know that no one is going to read, let alone pay for, The International Journal of Business and Social Research or World Journal of Social Sciences.

I have had people try to defend the pay to publish model by saying that a lot of good journals charge fees. Those good journals charge submission fees. The incentives created by submission fees are exactly the opposite of those created by a publication fee. Submission fees encourage authors not to submit crap. Publication fees encourage journals to publish crap. They don't get paid if they don't publish the paper.

I'm not opposed to open access, and I certainly don't support Elsevier, but I don't like it when people champion open access without regard to the consequences.

Recent papers about economic history

Naomi Lamoreaux “Beyond the Old and the New: Economic History in the United States”

Claude Diebolt and Mike Haupert Clio’s Contributions to Economics and History

Isn't this what we are supposed to do?

Pseudoerasmus recently posted an analysis of the issues involved in the slave productivity debate. He also sent me a link to an interesting discussion between Edward Baptist and Trevon Logan on Twitter. I had previously noted Logan's review of Baptist's book in the JEH, which should be mandatory reading for anyone starting work in American history, economic or otherwise. I looked at some related tweets and saw that at one point Baptist wondered who his critics were and what motivated them. He seemed bothered by the anonymity of Pseudoerasmus. I've heard that Alexander Hamilton and William Sealy Gosset published some interesting stuff under pseudonyms. Anyone who wants to know more about who I am can click on the link to my CV in the upper right hand corner. I know John Clegg is a historical sociologist at NYU. I don’t know anything more about him. Pseudoerasmus is an anonymous blogger.   I don’t know who he is, and I don’t care. I evaluate what he writes, not who I think he is. I also don’t know anything about Edward Baptist other than what he writes. For all I know he might be a great guy. He may donate to the food bank and volunteer at the homeless shelter. I wouldn’t be surprised to hear he does both. I haven’t written about who he is, I’ve written my responses to things he has written.

As for the question of motivation, isn’t this what we are supposed to do? One person makes an argument: they state a claim and try to support it with logic and evidence. Other people respond to it. If they think the argument is wrong they say so and explain their reasoning. In Time on the Cross, Fogel and Engerman stated their theses, their reasoning and their evidence. Many economists and historians pointed out errors in all three. To the best of my knowledge, they did not ask what is motivating these guys; they (and their students) went looking for more evidence. 

When I was at Washington University I worked with Doug North (be the way yesterday was Doug’s birthday). Over a very long career, Doug was wrong more than a few times. For example, the central thesis of Economic Growth of the United States does not seem to have been supported by subsequent research. He once told me that the only real benefit of getting older was that he had learned a lot of things that did not work. Doug always seemed to be much more concerned about what he was going to do than with what he had done. Again, he once told me that his aim was to correct his errors before others did. In our economic history seminars we did not sit around telling each other how wonderful we were. My recollection is that people tried to find every potential flaw. I once asked John Nye if he hadn't been awfully hard on someone (not me). John said, "He's a big boy."

So, I don’t understand this question about the identity of critics or their motivation. It doesn’t matter who I am. It matters what I write. I do it because it’s what I am supposed to do.   Edward Baptist wrote a book related to American economic history. My primary field is American economic history. The book was getting a lot of attention, and I thought it was seriously flawed. I wrote about those flaws.

More and more capitalism and slavery

Now Baptist responds to Clegg at the Junto. Have I ever mentioned that the Junto is one of the best blogs out there. I think I have. I find Baptist's response to be about as well reasoned and persuasive as his other work.

Even More on Capitalism and Slavery

The Junto Blog post regarding slavery and capitalism prompted a discussion in the comment section, which Edward Baptist joined in on. He argued that he had not misrepresented the work of Olmstead and Rhode but then doubled down and presented an even more misleading version of their work.

Baptist writes that

 “I argue that they adopt a new system around 1800, more or less, as evidenced by the narratives of survivors, which is supported by the very existence of systematic cotton-picking data itself. (It’s unclear, in Olmstead and Rohde’s argument) why their data even exists.)  

In their paper in the Journal of Economic History, Olmstead and Rhode state that planters kept record books of the pickings of individual slaves and that

“Failing to meet picking standards had severe consequences. In 1834 S. A. Townes of Marion, Alabama threatened to "make those bitches go at least 100 [pounds] or whip them like the devil.” In the 1830s Dr. J. W. Monett of Mississippi asserted that after weighing an individual's daily picking, masters would whip slaves for light or trashy picking. On several occasions, Louisiana planter Bennet Barrow ordered a whipping for all hands because the output was too low. As yet another example, John Edwin Fripp of South Carolina recorded "popping" and "switching" his slaves for light picking. On the Mississippi plantation of John Quitman and Henry Turner, a number of slaves ran away rather than face punishment for light or trashy picking.”

In other words, they argued, based on the evidence, that the slaveholders used the combination of detailed record keeping and whipping to maximize the productivity of slaves. In addition, they found that the average pounds of cotton picked by a slave increased over time. 

There are essentially two ways that this increase over time could have occurred. First, slaves could have been forced to pick closer to the maximum that they were physically capable of. Second, the maximum that they were physically capable of picking increased over time. O & R argue for the second explanation. Improved plants enabled slaves to pick more cotton in a given amount of time. In other words, slaveholders used physical coercion to force slaves to pick at maximum picking rates and through plant breeding they were able to increase this maximum amount that a person was physically capable of picking overtime.

Baptist’s alternative seems to be that the maximum remained relatively stable (he acknowledges that improved plants may have played some role), but planters became more effective at forcing people to produce up to the maximum. But this explanation poses several problems.

1.      

Why were early slaveholders so bad at pushing people to their capacity? Keep in mind that all the records on picking are from slaveholders who kept picking books, yet picking rates in the 1820s appear to have been well less than half of those in the ‘40s and ‘50s.  

2.      

Why didn’t these techniques carry over to other crops (sea island cotton and sugar)

The two problems are illustrated with the following figures from  O & R. 

Finally, Baptist now seems to make much of the claim that productivity fell after the war, suggesting that this somehow contradicts O & R's argument. He claimed that there was a consensus on the decline in productivity. I pointed out that there was not a consensus on the issue and that the data used to estimate productivity after the war are not strictly comparable to that from the antebellum picking books. Personally, I suspect there was probably a decline in productivity. But a decline in productivity is consistent with O & R’s argument. Why? Because they assumed that physical coercion was used to push slaves throughout the period. If you remove it productivity will fall. Pseudoerasmus notes in the comments section at the Junto that the sources Baptist cites are more consistent with O & R's argument than they are with his.