More on Doug North

I don’t think anyone has yet mentioned Doug’s influence on the teaching of economics. The Economics of Public Issues (19^th edition) is still in print, though the first edition is still, in my opinion, the best. Like all successful entrepreneurs North and Miller attracted competitors and influenced the way material is presented in standard textbooks. Doug told me it sold enough to put three sons through Stanford. The book came about as a result of his returning to teaching principles of economics after several years of not having done so.   He finished his lecture on perfect competition with some reference to agricultural markets and asked if there were any questions. A student stood up in the back of the lecture hall. Doug asked him what his question was and the student said “That’s bullshit.” Doug said if you’re so smart why don’t you tell us all about it. Turned out the guy grew up on a farm in Eastern Washington and knew all about how the government interfered with agricultural markets. Doug said he knew that he couldn’t keep giving textbook lectures, but he didn’t know what he should do. He had been working with the Seattle City Council and began his next class with a statement about how many rapes and murders the council had voted to allow, illustrating the consequences of choices about how to allocate spending in the city. Doug ended up writing stories about the economics of crime, abortion, baseball, marijuana etc. He said it was Roger Le Roy Miller’s idea to turn these stories into a book. It sold so well as a textbook that they tried to sell a trade version called Abortion, Baseball and Weed. It bombed; people weren’t ready for freakonomics yet.

I also wanted to note that a couple of couple of places (e.g. NY Times) have mentioned that Doug’s father dropped out of school to become an office messenger. What they did not mention was that his father went on to become vice-president of Metropolitan Life Insurance Company. Doug’s uncle, his father’s younger brother, eventually became the president of Metropolitan Life Insurance Company. I had the impression that he was quite proud of his father. He said that his father was always the one to give the speech when they wanted to get the agents fired up. Doug’s dissertation was a pretty traditional economic history of the life insurance business, with a focus on the Armstrong Investigation. I seem to recall that he said his family was not particularly pleased with his essentially airing the family’s dirty laundry.

Here are some tributes to Doug by people who knew him well

Yoram Barzel remembers Doug at University of Washington

John Nye has both a personal reflection and a review of Doug’s contribution to economics.

John Wallis provides a really good review of Doug’s contributions to social sciences.

Barry Weingast’s tribute to Doug is my favorite so far. As soon as I saw the quote beginning with “Listen, Bub” I could heard Doug’s voice.

Just Listen

In response to this Huffington Post article Jaci Evan's (a former student of mine who is about to finish her  Ph. D. at U. of Maryland) wrote this on Facebook.  Please listen to her.


"There are so many things I could write here that it's hard to choose. But I think I'll say this: I still remember the first time an adult man made me feel sexualized and unsafe. I was 12. That memory has stuck with me to this day, and it was the first of a countless number of times that it has happened since. So when your girlfriend says that your neighbor's behavior makes her feel unsafe, don't say you think it sounds normal, just listen. When she says she doesn't think she'd enjoy travelling to that country known for men who grope women on the subway or cat-call on the streets, don't tell her she's being too sensitive about it, just listen. When she gets upset about those "good old boy" songs involving rape that so many frats get in trouble for these days, don't tell her that they don't really mean it, just listen. Your reality isn't hers, and her thoughts are valid. They come from horrific experiences in her past and in her knowledge of horrific experiences in her friends' pasts. Just listen."

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