457 2. The locus classicus is probably Friedman [1976, 2821. 5. As an example chosen more-or-less... more 457 2. The locus classicus is probably Friedman [1976, 2821. 5. As an example chosen more-or-less at random, consider Zeckhauser [1987, 2571: "Since the time of 3. In fact, of course, most if not all modeling of Frank Knight, economists have paid attention to the the interaction among decision-makers requires that distinction between risk (where probabilities are probability distributions be both objective (accurately known) and uncertainty (where they are unknown)." reflective of observed frequencies of states of the Zecfiauser goes on to criticize the distinction-along world) and intersubjectively shared. For a relevant dislines that come close to what (we argue) Knight actucussion, see High [1990, chapter 31. ally intended.
How does the productivity of a commune compare with that of a conventional firm? This paper addre... more How does the productivity of a commune compare with that of a conventional firm? This paper addresses this question quantitatively by focusing on the history of a religious commune called the United Society of Believers, better known as the Shakers. We utilize the information recorded in the enumeration schedules of the US Manufacturing and Agriculture Censuses, available for the period between 1850 to 1880, to estimate the productivities of Shaker shops and farms. From the same data source, we also construct random samples of other shops and farms and estimate their productivities for comparison with the Shakers. Our results provide support to the contention that communes need not always suffer from reduced productivity. Shaker farms and shops generally performed just as productively as their neighbors; when differences did exist between their productivities, there are good reasons to attribute them to factors other than organizational form.
Isolated Shaker communal farms stressed self-sufficiency as an ideal but carefully chose which go... more Isolated Shaker communal farms stressed self-sufficiency as an ideal but carefully chose which goods to buy and sell in external markets and which to produce and consume themselves. We use records of hog slaughter weights to investigate the extent to which the Shakers incorporated market-based price information in determining production levels of a consumption good which they did not sell in external markets: pork. Granger causality tests indicate that Shaker pork production decisions were influenced as hypothesized, strongly by corn prices and weakly by pork prices. We infer that attention to opportunity costs of goods that they produced and consumed themselves was a likely factor aiding the longevity of Shaker communal societies. This paper considers the ways in which decisions made by religious-communal farms in nineteenth century America differed from those made by contemporary family farms. Just how family farms made decisions in the past is an open issue, of course. Writers in the social history tradition have hypothesized the existence of a moral-economic mentalité in which farmers exchanged goods and labor outside of market settings. Economic historians, most notably Winifred Rothenberg, have challenged this interpetation by producing evidence of decisions made according to rational economic behavior, including price convergence over time, skill premia in labor markets, and positive supply elasticities in livestock markets. 1
When the Shakers established communal farms in the Ohio Valley, they encountered a new agricultur... more When the Shakers established communal farms in the Ohio Valley, they encountered a new agricultural environment that was substantially different from the familiar soils, climates, and markets of New England and the Hudson Valley. The ways in which their response to these new conditions differed by region has not been well documented. We examine patterns of specialization among the Shakers using the manuscript schedules of the federal Agricultural Censuses from 1850 through 1880. For each Shaker unit, we also recorded a random sample of five farms in the same township (or all available farms if there were fewer than five). The sample of neighboring farms included 75 in 1850, 70 in the next two census years, and 66 in 1880. A Herfindahl-type index suggested that, although the level of specialization was less among the Shakers than their neighbors, trends in specialization by the Shakers and their neighbors were remarkably similar when considered by region. Both Eastern and Western Shakers were more heavily committed to dairy and produce than were their neighbors, while Western Shakers produced more grains than did Eastern Shakers, a pattern imitated in nearby family farms. Livestock and related production was far more important to the Eastern Shakers than to the Western Shakers, again similar to patterns in the census returns from other farms. We conclude that, despite the obvious scale and organizational differences, Shaker production decisions were based on the same comparative advantages that determined production decisions of family farms.
This paper develops a model of judicial decision-making based on a judge's concern for reputation... more This paper develops a model of judicial decision-making based on a judge's concern for reputation and the interdependence of judges' decisions through precedent. The audience of judges plays a crucial role in the analysis. In general, we show that reputation can both restrain judicial discretion, but also inspire it if future judges are expected to be persuaded by a decision and follow it, thereby enhancing the authoring judge's reputation.
Debtors' prisons have been commonplace throughout history, including in the United States. While ... more Debtors' prisons have been commonplace throughout history, including in the United States. While imprisonment for debt no doubt elicited some repayment by benefactors of the debtor, we argue that its primary function was to deter default in the first place by giving borrowers an incentive to disclose hidden assets. Because of its cost, however, imprisonment was destined to be replaced by more efficient ways of preventing borrowers from sheltering assets. Empirical analysis of state laws banning imprisonment for debt provides support for this argument. In particular, the results suggest that states in which the publishing industry developed sooner (thus facilitating the flow of information) were more likely to enact early bans on imprisonment for debt.
Abstract A distinctive feature of the Shaker organization of communes was to divide each commune ... more Abstract A distinctive feature of the Shaker organization of communes was to divide each commune into economically independent subdivisions called “Families.” Although the sharing of wealth and egalitarian distribution of output were integral aspects of Shaker religious practice, the organization of their communes based on the Family system led to inequalities among Families. The data from the 1850, 1860, and 1870 US Census enumeration schedules show that income and wealth per capita differed substantially across Shaker communities and even among Families within the same community. One large commune for all Shakers could have avoided distributional inequalities, but the costs of motivation and coordination would have risen with group size. The Family system was a compromise that balanced communal ideals with these costs.
Until the seventeenth century, the Ottomans used fines extensively for law enforcement and employ... more Until the seventeenth century, the Ottomans used fines extensively for law enforcement and employed agents to collect the fines. Fines can be costly to implement because of agency problems and corruption. To solve the problem of corruption, the Ottomans implemented a variety of mechanisms, including periodic rotation of officials, separation of adjudication from punishment, and compensation for law enforcers through a two-part scheme consisting of fines and taxes. The system underwent a significant transformation after the seventeenth century, following a period of high inflation that raised the agency cost of a fixed fine system. Imperial decentralization in the provinces and the institution of long-term taxfarming also altered the government"s relationship with local law enforcement agents and reduced the effectiveness of control mechanisms. Consequently, the Ottomans relied less on fines for punishment. Using insights from the law and economics literature, we examine how the earlier mechanisms helped to combat corruption in law enforcement and why they were less effective in later periods.
This paper studies the unique nature, institutional roots, and economic consequences of the ruler... more This paper studies the unique nature, institutional roots, and economic consequences of the ruler's political power in Islamic History. An influential interest group in Islamic societies has been the legal community, whose power could range from being able to regulate the rulers to being entirely under their control. The struggle was over the provision of legal goods and services, the legal community gradually gaining control of the law in history and the rulers seeking to appropriate political power by controlling the legal community. The economic consequence of power was the ability to dictate the choice of tax bases and rates.
This paper contributes to the literature on private law enforcement by proposing a novel solution... more This paper contributes to the literature on private law enforcement by proposing a novel solution to the problem of underenforcement by monopolistic enforcers. Monopolistic enforcers underinvest in fine collection because, by maximizing net expected revenue, they ignore the social benefits of deterrence. We show that this problem can be partially resolved by combining the tasks of law enforcement with tax collection because a joint enforcer-collector will have an interest in reducing the crime rate in order to maximize his income from taxes. In support of the theory, we discuss two historical examples of this practice: decentralized law enforcement under European feudalism, and centralized law enforcement in the Ottoman Empire.
A fundamental question of economic and technological history is why some civilizations had adopte... more A fundamental question of economic and technological history is why some civilizations had adopted new and important technologies and others have not. In this paper, we analyze the effect that new technologies have on agents that legitimize rulers. We construct a simple political economy model that suggests that rulers may not accept productivity-enhancing technologies when they negatively affect an agent's ability to provide the ruler legitimacy. However, when other sources of legitimacy emerge, the ruler will accept the technology. We use this insight to help explain the initial blocking but eventual accepting of the printing press in the Ottoman Empire, industrial technologies in Imperial Russia, and military technologies in Qing China.
New technologies have not always been greeted with great enthusiasm. Although the Ottomans were q... more New technologies have not always been greeted with great enthusiasm. Although the Ottomans were quick to adopt advancements in military technology, they waited for almost three hundred years to allow the first book to be printed in Arabic script. We explain differential reaction to technology through a political economy approach centered on the legitimizing relationship between the rulers and their agents (e.g., military or religious authorities). The Ottomans readily accepted new military technologies such as gunpowder and firearms because they increased the net revenue available to the ruler and reduced the expected value of revolting against him. But they objected to the printing press because it would have decreased the ruler's net revenue by undermining the legitimacy provided by religious authorities, and it would have raised the probability and expected value of a revolution. The printing press was allowed in the eighteenth century after alternative sources of legitimacy emerged.
New technologies have not always been greeted with full enthusiasm. Although the Ottomans were qu... more New technologies have not always been greeted with full enthusiasm. Although the Ottomans were quick to adopt advancements in military technology, they waited almost three centuries to sanction printing in Ottoman Turkish (in Arabic characters). Printing spread relatively rapidly throughout Europe following the invention of the printing press in 1450 despite resistance by interest groups and temporary restrictions in some countries. We explain differential reaction to technology through a political economy approach centered on the legitimizing relationships between rulers and their agents (e.g., military, religious, or secular authorities). The Ottomans regulated the printing press heavily to prevent the loss it would have caused to the ruler's net revenue by undermining the legitimacy provided by religious authorities. On the other hand, the legitimizing relationship between European religious and political authorities was undermined over a century prior to the invention of the press. European rulers thus had little reason to stop the spread of printing as public policy, nor could the Church have stopped it had it wanted to. The Ottomans eventually sanctioned printing in Arabic script in the eighteenth century after alternative sources of legitimacy emerged.
A fundamental question of economic and technological history is why some civilizations adopted ne... more A fundamental question of economic and technological history is why some civilizations adopted new and important technologies and others did not. In this paper, we construct a simple political economy model which suggests that rulers may not accept a productivity-enhancing technology when it negatively affects an agent's ability to provide the ruler legitimacy. However, when other sources of legitimacy emerge, the ruler will accept the technology as long as the new legitimizing source is not negatively affected. This insight helps explain the initial blocking but eventual accepting of the printing press in the Ottoman Empire and industrialization in Tsarist Russia.
This paper examines the effects of risk and transaction costs on the allocation of tax revenues, ... more This paper examines the effects of risk and transaction costs on the allocation of tax revenues, commonly known as the tax assignment problem: who should tax what and how in a multi-level system of government? Tax assignment was an important problem for the Ottoman state, which by mid sixteenth century had built a vast Empire that covered much of the Middle East, North Africa, and Eastern Europe. The Empire collected revenues from various types of taxes and assigned these revenues between the central, provincial and district governments, and other recipients like fiefholders and pious foundations. Tax revenues were of two types, fixed taxes and variable taxes, which differed in their risk and transaction cost for the recipient. To understand how tax revenues were assigned, we examine how recipients varied in their capabilities to deal with risks and transaction costs. Formulating the competing implications of the risk and transaction cost explanations as testable hypotheses, we test them quantitatively with data from tax registers. The results show that in most regions tax assignment was influenced more by transaction costs than risks, suggesting that there were feasible alternatives for the recipients to insure against risk.
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Papers by Metin Cosgel