Sat, 14 April 2018
The assiduous Vincent Geloso returns to the podcast to discuss his work with Rosolino Candela on lightships and their importance in economics. The abstract of their paper reads as follows:
What role does government play in the provision of public goods? Economists have used the lighthouse as an empirical example to illustrate the extent to which the private provision of public goods is possible. This inquiry, however, has neglected the private provision of lightships. We investigate the private operation of the world’s first modern lightship, established in 1731 on the banks of the Thames estuary going in and out of London. First, we show that the Nore lightship was able to operate profitably and without government enforcement in the collection of payment for lighting services. Second, we show how private efforts to build lightships were crowded out by Trinity House, the public authority responsible for the maintaining and establishing lighthouses in England and Wales. By including lightships into the broader lighthouse market, we argue that the provision of lighting services exemplifies not a market failure, but a government failure.
Economists have been using lighthouses as examples of pure public goods since at least John Stuart Mill. This modern debate on whether lighthouses really deserve their status as the archetypical example goes back to Coase (1974), who pointed out that many lighthouses in Great Britain had been privately funded through harbour fees. According to the theory of pure public goods, free riding should have destroyed this market, but it didn't. This has sparked a spirited debate about just how private those "private" lighthouses were, and whether the level of government intervention in the lighthouse market was necessary to solve the free rider problem.
Candela and Geloso's work on lightships shows that a pure private solution to the lighthouse problem actually existed historically. They detail the launching of the first lightship by the entrepreneurs David Avery and Robert Hamblin at the mouth of the Thames River in 1731, and the ways they were able to finance this apparently "public" good.
Fri, 6 April 2018
My guest for this episode of Economics Detective Radio is Bart Wilson of Chapman University. He is the author of many experimental economics studies. Our conversation today focuses on one particular study entitled Language and cooperation in hominin scavenging. The abstract reads as follows:
Bickerton (2009, 2014) hypothesizes that language emerged as the solution to a scavenging problem faced by proto-humans. We design a virtual world to explore how people use words to persuade others to work together for a common end. By gradually reducing the vocabularies that the participants can use, we trace the process of solving the hominin scavenging problem. Our experiment changes the way we think about social dilemmas. Instead of asking how does a group overcome the self-interest of its constituents, the question becomes, how do constituents persuade one another to work together for a common end that yields a common benefit?
You can view a video demonstration of the experimental software here. The animation is quite cute!
Derek Bickerton is the linguist whose theories Bart referenced in this episode.
Fri, 10 November 2017
We discuss the economic reasoning behind some of history's strangest practices: ordeals that were used to determine innocence or guilt in medieval Europe, trials by battle that were used to settle land disputes in Norman England, wife auctions that happened during the Industrial Revolution, and the criminal prosecution of insects and rodents by ecclesiastical courts in Renaissance Italy.
Also check out Peter's previous book, The Invisible Hook, about the economics of pirates. You won't regret it!
Fri, 3 November 2017
My guest today is Jared Rubin of Chapman University. He is the author of Rulers, Religion, and Riches: Why the West Got Rich and the Middle East Did Not, which is our topic for today.
The book deals with the question of why Western Europe became wealthier than the Middle East after centuries of being poorer. The book is part game theoretic model of society, part historical narrative through the lens of that model.
The model considers two main factors: the state's power to coerce and its need for political legitimacy granted by elites. Importantly, different groups have been the ones to grant legitimacy to the state in different times and places. In the Muslim world, religious leaders primarily played this role, as they did in Europe prior to the Reformation.
After the Reformation, however, the power of the Catholic Church was much diminished in many parts of Europe. Rulers in places like England and the Dutch Republic turned to economic elites to grant them legitimacy. This gave the merchant and capitalist classes a seat at the bargaining table, setting the stage for the Industrial Revolution.
Sat, 21 October 2017
Returning to the podcast is David Henderson of Stanford University's Hoover Institution and the Naval Postgraduate School in Monterey California.
Our topic for today is the German Economic Miracle. David wrote an article on it for the Concise Encyclopedia of Economics. The article begins as follows:
"After World War II the German economy lay in shambles. The war, along with Hitler’s scorched-earth policy, had destroyed 20 percent of all housing. Food production per capita in 1947 was only 51 percent of its level in 1938, and the official food ration set by the occupying powers varied between 1,040 and 1,550 calories per day. Industrial output in 1947 was only one-third its 1938 level. Moreover, a large percentage of Germany’s working-age men were dead. At the time, observers thought that West Germany would have to be the biggest client of the U.S. welfare state; yet, twenty years later its economy was envied by most of the world. And less than ten years after the war people already were talking about the German economic miracle.
We discuss the West German economy, before and after WWII, and contrast it with the East German economy. We also discuss some of the interesting figures who played roles along the way: Ludwig Erhard, Wilhelm Röpke, Konrad Adenauer, and Walter Heller.
We wrap up by discussing the Concise Encyclopedia of Economics itself, which David created and has edited since its first publication in 1993.
Fri, 28 July 2017
Noel recently released a working paper titled "The Effects of Land Redistribution: Evidence from the French Revolution." It is coauthored with Theresa Finley and Raphael Franck. The paper examines the consequences of the land auctions held by the Revolutionary government in France. The abstract reads as follows:
This study exploits the confiscation and auctioning off of Church property that occurred during the French Revolution to assess the role played by transaction costs in delaying the reallocation of property rights in the aftermath of fundamental institutional reform. French districts with a greater proportion of land redistributed during the Revolution experienced higher levels of agricultural productivity in 1841 and 1852 as well as more investment in irrigation and more efficient land use. We trace these increases in productivity to an increase in land inequality associated with the Revolutionary auction process. We also show how the benefits associated with the head-start given to districts with more Church land initially, and thus greater land redistribution by auction during the Revolution, dissipated over the course of the nineteenth century as other districts gradually overcame the transaction costs associated with reallocating the property rights associated with the feudal system.
What's so interesting about this particular instance of land redistribution is the fact that it was all sold to the highest bidder rather than being given to the poor. This breaks with the pattern of most attempts at land reform throughout history. People have been trying to take land away from the rich and give it to the poor since at least Tiberius Gracchus in the second century BCE. But the Revolutionary government needed money and they needed it fast. So they concocted a plan to seize and auction off all French lands owned by the Catholic Church, which comprised about 6.5 percent of the country.
Land auctions take time though, and the government desperately needed funds in the short term, so they issued a monetary instrument known as the assignat that could be used in these land auctions. The land was eventually auctioned off and then traded in secondary markets, where much of it was consolidated into large estates that could employ capital-intensive agricultural practices on a large scale.
The evidence suggests that these land auctions added to the productivity of the regions where they occurred. Noel argues that this occurred because the reduction in transaction costs allowed for a more efficient allocation of property rights. One could argue, however, that the Church might have simply owned more productive land to begin with, and the paper uses a series of identification strategies to show that this is not the main driver of their results.
Rachel Laudan discusses the history of potatoes and other foods on EconTalk.
Photo credit: Early French banknote issue during the French Revolution (Assignat) for 400 livres, (1792), from the National Numismatic Collection at the Smithsonian Institution.
Fri, 9 June 2017
My guest for this episode is Mark Koyama of George Mason University. Our topic is a recent paper titled, "States and Economic Growth: Capacity and Constraints," which Mark coauthored with Noel Johnson.
As stated in the paper, "state capacity describes the ability of a state to collect taxes, enforce law and order, and provide public goods." That said, state capacity does not mean big government. A state may have the power to impose rules across its territory, but it doesn't have to use that power in a tyrannical way. Another way of saying that is to say that having a high state capacity is compatible with Adam Smith's desire for "peace, easy taxes, and a tolerable administration of justice."
One metric that researchers use to measure state capacity is tax revenue per capita. But as Mark is careful to point out, a state with less state capacity can still sometimes achieve a relatively high income through tax farming. This is the practice in many pre-modern states of auctioning off the right to extract tax revenues to local elites in different regions.
We discuss the rise of modern nation-states in various regions, and why some states developed more state capacity than others going into the twentieth century. In particular, we discuss Europe's transition away from a feudal system ruled in a decentralized way by monarchs who held power based on their personal relationships with local lords. England's Glorious Revolution of 1688 allowed it to develop its state capacity earlier than other European nations, with a centralized tax system controlled by parliament.
By contrast, continental powers like the French Ancien Régime and the Hapsburg Empire were legally and fiscally fragmented, leading them to develop their state capacity much later than England.
We also discuss the development of state capacity in Asia, and why Meiji Japan was able to develop its state capacity much faster than Qing Dynasty China.
Fri, 2 June 2017
My guest for this episode is Nuno Palma, he is an assistant professor of economics, econometrics, and finance at the University of Groningen.
Our discussion begins with the monetary history of England. Nuno has authored a study that reconstructs England's money supply from 1270 to 1870. We discuss his methods and findings. We also discuss the influx of precious metals into European markets after the discovery of the New World.
Later in the conversation, we discuss the effect of trade on economic growth during the industrial revolution. Nuno places a greater importance on international trade than McCloskey and Mokyr, but a lesser importance than historians like Wallerstein. Although gross trade flows were not particularly large, trade created new domestic industries like the porcelain industry that was created to compete with Chinese imports. Imports also encouraged urbanization among the European population, something that created many positive spillover effects over the long term.
Fri, 26 May 2017
My guest for this episode is Jari Eloranta, he is a professor of comparative economic and business history at Appalachian State University. Jari's work focuses on the economic history of national defense. In this far-reaching conversation, we go all the way back to pre-modern societies' methods of financing their militaries, then trace the transitions up through the early modern period and into the 20th century. We discuss the way war has shaped modern states and institutions.
Fri, 24 March 2017
Returning to the podcast is Vincent Geloso of Texas Tech University.
Our topic for this episode is anthropometric history, the study of history by means of measuring humans. Doing serious historical research into the distant past is difficult work, because the further you look back in time, the less information you can access. For the 20th century we have wonderful thing like chain-weighted real GDP. Going back further, we have some statistics, lots of surviving physical evidence, and loads of documents and writings. Going further than that, we're left with the odd scrap of thrice-copied surviving manuscripts and second-hand accounts from people who lived centuries after the events they describe. And going even further than that, we have just bones and dilapidated temples with the occasional inscription.
Anthropometric history allows us to look into the distant past at what economic historians like Vincent hope might be a good measure of different populations' health and standards of living: their heights. People who have healthy upbringings with lots of access to food tend to be taller than people who don't; that's why modern humans are much taller than they were a thousand or even a hundred years ago.
Vincent has contributed to this literature with his latest co-authored paper, The Heights of French-Canadian Convicts, 1780s to 1820s. The abstract reads as follows:
This paper uses a novel dataset of heights collected from the records of the Quebec City prison between 1813 and 1847 to survey the French-Canadian population of Quebec—which was then known either as Lower Canada or Canada East. Using a birth-cohort approach with 10 year birth cohorts from the 1780s to the 1820s, we find that French-Canadian prisoners grew shorter over the period. Through the whole sample period, they were short compared to Americans. However, French-Canadians were taller either than their cousins in France or the inhabitants of Latin America (except Argentinians). In addition to extending anthropometric data in Canada to the 1780s, we are able to extend comparisons between the Old and New Worlds as well as comparisons between North America and Latin America. We highlight the key structural economic changes and shocks and discuss their possible impact on the anthropometric data.
Listen to the full episode for our fascinating discussion of this branch of historical research, including the so-called "Antebellum puzzle," the anomalous observation that American heights decreased in the years prior to the Civil War even though the economy was apparently growing rapidly. We also discuss the heights of slaves in the American South, who were taller than their white counterparts despite being oppressed as slaves.