Relative Costs of Living, for Richer and Poorer, 1688-1914

I have a new working paper on inequality. This time, I teamed up with one of my early influences: Peter Lindert of UC-Davis. Peter’s work was deeply influential on my development as an economic historian and economist and thus I am happy to work with him on this. We used the data for Canada that I assembled along with other price data to create measures of the inequality in the cost of living since the late 17th century in New World countries such as Canada, the United States and Australia (after 1850) which we could compare with the United Kingdom. We found that from circa 1800 to 1914, price trends were egalitarian (prices changes benefited the poor more than the rich). We also find that the New World was indeed the “best poor man’s country”. Finally, we find that when we adjust nominal-income figures of income inequality for inequalities in the cost of living, the movements of inequality are attenuated. The abstract is below and the paper is available here on SSRN:

The kinds of goods that richer and poorer households consumed differed more strongly in the past than today. Movements in the relative prices of luxury goods versus staples caused the real inequality to oscillate in ways missed by the usual historiography of (nominal) inequality. On both sides of the North Atlantic and in Australia, real inequality rose significantly less in 1800-1914 than the literature on nominal inequality has revealed. The reasons for this relate to the relative decline of food prices, rural-urban price gaps, and the delayed rise of luxury service prices, especially after 1850. Throughout these centuries, the North Americans enjoyed lower living costs than their counterparts in Western Europe.

Winner of the 2018 Gordon Tullock Award for best article in Public Choice

A few days ago, I was informed that Rosolino Candela and myself were awarded the Gordon Tullock prize for best article published in Public Choice by junior scholars. The announcement is now public (see here). The award was granted for our article “The Lightship in Economics” (which can be consulted here).

The list of previous winners of the Gordon Tullock prize can be consulted here. I want to point out that, in recent years, many of the recipients have been interested in economic history. For example, Mark Koyama and Emily Skarbek shared the award for their respective works on private prosecutions in England during the 18th and 19th centuries and disaster relief efforts in Chicago following the Great Fire of 1871. Another example is that of Jayme Lemke on inter-jurisdictional competition and women’s rights at the dawn of the 20th century. I am happy to be in such great company economic-history wise.

 

 

Why consider the lighthouse a public good?

I know I talk about lighthouses a lot. This is because they are economically relevant. They are the penultimate example of public goods and they underlie all positive (i.e. scientific) justifications for state-provision of public goods. However, economic theory has whitewashed the history of the lighthouse in order to make this case. In reality, the lighthouse never was a public good and it never was, before the 19th century, the main way of providing maritime safety. Alongside Rosolino Candela, in a new working paper, I provide a ton of historical evidence showing that it was a complement to private goods and services such as pilotage and ballastage. Because it was a complement to other goods, it could be privately provided through bundling. That option was prohibited, however, by rent-seeking and monopoly privileges granted to firms/guilds involved in the production of the private goods that could (and did) produce lighthouses and other such services. As such, Rosolino and me are arguing that economists were wrong to consider the lighthouse even as a public good. The abstract is below and the link to the SSRN paper (submitted for a special conference on the economics of James Buchanan) is here.

Was the lighthouse ever a public good? The lighthouse is presented as the quintessential public good as it was inherently non-excludable and non-rivalrous. Since the work of Ronald Coase (1974) on the lighthouse, economists have used debated the extent to which the private provision of public goods is possible. In this work, we highlight recent findings in the history of lighting services (especially private provision of said services) in order to argue that it may be incorrect to consider the lighthouse as a public good. First, we argue that lighthouses are probably better seen as a complement to other maritime services (e.g. pilotage, docking, ballastage). The lighthouse could have been bundled with these complements, which were excludable and rivalrous, in ways that would have permitted its provision. Second, we argue that organizations in charge of providing lighthouses were aware of this bundling possibility and lobbied hard to monopolize these other aspects of the trade in ways that limited entrepreneurial opportunities.

The bias against presidential restraint

I have a new working paper available, this time co-authored with Frank Garmon and Phillip Magness. In this paper, we argue that rankings of presidential greatness in the United States (i.e. the evaluation of presidential performance) have systemic biases resulting from Presidents wanting to rank higher in such rankings. Because Presidents care about their historical reputations (i.e. how well they rank relative to other Presidents), they want to leave a mark that historians can observe. This means that there is a bias in favor of being proactive and that there is a penalty to being restrained. Presidential restraint means that there are fewer crumbs in the forest for historians to follow. However, there is no reason to believe that restraint is an inefficient (in terms of socio-economic outcomes) course of action. There are numerous instances where restraint could be warranted. Thus, restraint may be desirable socially but undesirable for an individual president as it means that he will not be seen as easily by historians. The abstract is below and the paper is available here on SSRN:

Comparative rankings of presidential performance can be clouded with partisan biases. Here, we argue that there is another and often overlooked bias: active presidents use power and in the process they highlight their performance. It is easier to observe the use of power than the restraint of power. As such, there is a form of selection bias in expert rankings of presidents whereby we are best able to evaluate those who are more proactive rather than those who, willfully or not, exercise political restraint. In this paper, we consider how presidential rankings of greatness are affected by measures of presidential restraint (use of veto powers, divided government, changes in the size of government). We find evidence that restraint has a negative effect on presidential rankings suggesting the presence of a bias historical evaluation whereby presidents that adopt proactive and interventionist policy stances leave more visible marks that impress more favorably upon expert rankings of presidents.

Did Separatism Hurt Quebec’s Economy? The Causal Effects of the Election of the Parti Québécois in 1976

I have a new working paper, co-authored with Kevin Grier. In the paper, we consider the consequences of the election of Quebec’s first separatist government in 1976. This is a paper that should have been written years ago given how often the topic is discussed in Canadian politics.  The paper can be consulted here on SSRN and the abstract is below:

Most separatist movements overlap with ethnic tensions and are associated with violent and economically destructive outcomes. In this paper, we consider a (largely) peaceful separatist movement. Specifically, we use the synthetic control method to study the economic consequences of the surprising victory of the Parti Québécois in Quebec in 1976 and the subsequent referendum on Quebec’s independence in 1980. We find that, relative to our control, the election of separatists had a small positive effect on economic activity until 1980 after which a small negative effect appears. We further find that the size of the provincial government (relative to GDP) constantly and significantly exceeded its synthetic control. We argue that the economic costs of separatism may arise from the frequently associated violence and not be intrinsic to any sort of political disintegration.

Measuring Away the Importance of Institutions: The Case of Seigneurial Tenure and Agricultural Output in Canada East, 1851

My paper on measurement errors of agricultural output in Lower Canada in 1851 and how it affects our evaluation of the effects of land tenure laws on farming productivity is now publicly available in Social Science Quarterly.  The abstract is below:

This article argues that the 1851 census of Canada East (the modern‐day province of Quebec) requires a set of important corrections. Using corrections based on ethnic origin composition, I demonstrate how significantly wheat and oat yields were underestimated in Canada East. More importantly, I argue that the measurement errors are not randomly distributed and that they are biased against attempts to test the role of institutions. I show how the new method of correcting the data change our interpretation of agricultural efficiency in Lower Canada in the mid‐19th century. While this correction may seem minor, it shows that in the past, the data took a form that was biased against numerous hypotheses concerning land tenure institutions.

New working paper: Social Justice, Public Goods and Rent-Seeking in Narratives

I have a new working paper (co-authored with Phil Magness) which has been submitted to Independent Review. In this short article, we explain a way to sort the wheat from the chaff with regards to social justice. We argue that relational equality (an idea at the center of the social justice literature) is a potent concept and that cementing relational inequality is a method of preserving rent-seeking arrangements that discriminate against particular groups (minorities or majorities). The paper is available here on SSRN and the abstract is below:

Social justice, as a concept, has long been considered inimical to the classical liberal tradition (Hayek 1976; Nozick 1973; 1974). To be fair, there is much to criticize about the concept. The definitional fluidity of the term, along with its frequent deployment for “activist” political endeavors, cast doubt upon the scholarly rigor of the term (Hayek 1978). However, where there is chaff, there is wheat and thus the possibility of salvaging some parts of the social justice concept to serve both normative and positive ends (Tomasi 2012, xvii-xx). Sorting the wheat from the chaff is the aim of this paper. To do so, we introduce the concept of “rent-seeking in narratives,” which, as we argue, takes the best concepts from the literature on social justice in order to make it a relevant tool for social science and classical liberal thought.