John Nye Remembers Doug North

A guest post by John V. C. Nye. A related version appears at Reason.

| John Nye |

Douglass Cecil North passed away at the age of 95 on Nov. 23, 2015 at his home in Michigan.  Joint recipient of the 1993 Alfred Nobel Memorial Prize in Economics, he will be remembered for his path breaking contributions to the field of economic history and his central role in creating the New Institutional Economics.  He spent most of his academic career at two institutions — the University of Washington in Seattle, and Washington University in St. Louis.  For much of the last two decades, he also maintained an association with the Hoover Institution at Stanford University.

Doug will be remembered for many things and others can go through his list of honors, awards, and accomplishments.  But for me, two things will always stand out — his devotion to his students and his personal role in my life as mentor, colleague, and friend.

On the first point, one could note the large number of great scholars who emerged under his supervision in both Seattle and St. Louis or those who were simply inspired by his teaching to pursue careers in academia.  But perhaps it is sufficient to observe that when the Jonathan Hughes Memorial Prize in teaching was instituted by the Economic History Society, North was the first recipient and an overwhelming favorite — not least of which because Jon Hughes had been one of Douglass’s first graduate students.  On the day North received the Nobel prize, he cut off his interviewers to teach his regular courses, and reporters got a first-hand look at North the teacher. (more…)

25 November 2015 at 10:29 am 1 comment

Douglass C. North (1920-2015)

| Peter Klein |

north_postcardI’m sorry to report that Doug North passed away yesterday at the age of 95. North was a key figure in the “cliometrics revolution” which sought to apply neoclassical economic theory and quantitative methods to the study of economic history, for which he received a Nobel Prize. He was also a founder, along with Ronald Coase and Oliver Williamson, of the “New Institutional Economics.” His work on economic growth, the role of institutions on national and international economic performance, the relationship between economic and political institutions, and many other fields has been extremely influential.

I don’t yet see many obituaries online but they will appear soon in the usual places. Here are some previous O&M posts on North. Here’s his Wikipedia entry. We’ll add some detailed commentaries soon.

I met North at the inaugural ISNIE conference in St. Louis in 1997, and saw him occasionally after that. He was friendly and approachable and interested in the work of younger scholars. North was an interdisciplinary thinker but always considered himself an economist first and foremost. I remember a small-group dinner at which he revealed an interesting conversation among the founders of International Society for New Institutional Economics (now SIOE). Coase had proposed calling the new organization the “International Society for New Institutional Social Science.” North reported that he replied, “Ronald, if you call it that, I will wish you well, but I won’t ever attend!”

Here is a nice reminiscence from Mike Sykuta.

Update: Here are obits in the NYT and WaPo. The former describes North in a way that makes economic history sound pretty interesting: “a diminutive, effervescent bon vivant [who] indulged his interests in haute cuisine, photography, fast cars, flying his own plane, hunting, fishing, tennis, hiking and swimming, pursuing some of them into advanced age.” (There is a story, perhaps apocryphal, about Washington University agreeing to pay North’s moving expenses when he took a professorship in St. Louis, then finding out later that transporting his wine collection required a refrigerated truck costing tens of thousands of dollars.)

24 November 2015 at 4:20 pm Leave a comment

Patents for Institutional Innovation

| Dick Langlois |

I was fascinated to learn about the recent ballot proposal in Ohio to legalize marijuana by constitutional amendment. The unusual aspect of the proposal was that it would have come with a grant of a monopoly in commercial marijuana production to specific investors who owned suitable land. Because they stood to gain considerably from passing the proposal, these investors devoted resources to getting it passed, including professional canvassers, political strategists, and even a mascot with a head shaped like a marijuana bud. Basic Public Choice teaches that legislation benefiting many diffuse constituents is hard to pass because of transaction costs. In effect, the monopoly aspect of the Ohio proposal would have granted a patent to the investors, thus giving them the incentive to overcome the transaction costs of collective action. The proposal failed, and at the same time Ohio voters passed an amendment forbidding the use of ballot initiatives for personal gain. It is interesting nonetheless to think about the economics of such “patents” for institutional innovation.

4 November 2015 at 3:22 pm 1 comment

The Internet as Collective Invention

| Dick Langlois |

Further to Peter’s post on government science funding: I just received, hot off the (physical) press, a copy of Shane Greenstein’s new book How the Internet Became Commercial (Princeton, 2015). Among the myths that Greenstein — now apparently at Harvard Business School — debunks is the idea that the internet was in any sense a product of government industrial policy. Although government had many varied and uncoordinated influences on the development of the technology, the emergence of the Internet was ultimately an example of what the economic historian Robert Allen called collective invention. It was very much a spontaneous process. And it was not fundamentally different from other episodes of technological change in history.

27 October 2015 at 1:58 pm Leave a comment

Science, Technology, and Public Funding

| Peter Klein |

This piece by Matt Ridley builds on Terence Kealey’s critique of government science funding, and also echoes Nathan Rosenberg’s critique of the linear model of science and technology. We have pointed out similarly that arguments for public science funding are usually not very scientific.

When you examine the history of innovation, you find, again and again, that scientific breakthroughs are the effect, not the cause, of technological change. It is no accident that astronomy blossomed in the wake of the age of exploration. The steam engine owed almost nothing to the science of thermodynamics, but the science of thermodynamics owed almost everything to the steam engine. The discovery of the structure of DNA depended heavily on X-ray crystallography of biological molecules, a technique developed in the wool industry to try to improve textiles.

Technological advances are driven by practical men who tinkered until they had better machines; abstract scientific rumination is the last thing they do. As Adam Smith, looking around the factories of 18th-century Scotland, reported in “The Wealth of Nations”: “A great part of the machines made use in manufactures…were originally the inventions of common workmen,” and many improvements had been made “by the ingenuity of the makers of the machines.”

It follows that there is less need for government to fund science: Industry will do this itself. Having made innovations, it will then pay for research into the principles behind them. Having invented the steam engine, it will pay for thermodynamics.

I have argued repeatedly against the “laundry list” rationale for public funding, the listing of technologies and products that came out of government programs, as if that were justification for these programs. Ridley agrees:

Given that government has funded science munificently from its huge tax take, it would be odd if it had not found out something. This tells us nothing about what would have been discovered by alternative funding arrangements.

And we can never know what discoveries were not made because government funding crowded out philanthropic and commercial funding, which might have had different priorities.

24 October 2015 at 3:28 pm Leave a comment

Deaton’s Critique of Randomized Controlled Trials

| Peter Klein |

Because we’ve been somewhat skeptical of randomized-controlled trials — not the technique itself, but the way it is over-hyped by its proponents — you may enjoy Angus Deaton’s critique of RCTs in development economics. I learned of Deaton’s arguments from this excellent piece by Chris Blattman in Foreign Policy. Here is the key paper, Deaton’s 2008 Keynes Lecture at the British Academy.

Instruments of Development: Randomization in the Tropics, and the Search for the Elusive Keys to Economic Development

Angus Deaton

There is currently much debate about the effectiveness of foreign aid and about what kind of projects can engender economic development. There is skepticism about the ability of econometric analysis to resolve these issues, or of development agencies to learn from their own experience. In response, there is movement in development economics towards the use of randomized controlled trials (RCTs) to accumulate credible knowledge of what works, without over-reliance on questionable theory or statistical methods. When RCTs are not possible, this movement advocates quasi-randomization through instrumental variable (IV) techniques or natural experiments. I argue that many of these applications are unlikely to recover quantities that are useful for policy or understanding: two key issues are the misunderstanding of exogeneity, and the handling of heterogeneity. I illustrate from the literature on aid and growth. Actual randomization faces similar problems as quasi-randomization, notwithstanding rhetoric to the contrary. I argue that experiments have no special ability to produce more credible knowledge than other methods, and that actual experiments are frequently subject to practical problems that undermine any claims to statistical or epistemic superiority. I illustrate using prominent experiments in development. As with IV methods, RCT-based evaluation of projects is unlikely to lead to scientific progress in the understanding of economic development. I welcome recent trends in development experimentation away from the evaluation of projects and towards the evaluation of theoretical mechanisms.

Blattman says Deaton has a new paper that presents a more nuanced critique, but it is apparently not online. I’ll share more when I have it.

12 October 2015 at 9:40 pm 1 comment

Angus Deaton and Modern Economics

| Peter Klein |

151013-angus-deaton-mn-0735_03fca06ed5077fbef855ea45627fe638.nbcnews-ux-2880-1000Angus Deaton has won the 2015 Nobel Prize for his work on measuring consumption and inequality. You can find lots of discussion in the usual places; Lynne has a nice summary here. I don’t know Deaton’s work well but he has been on the unofficial short list for the last several years and his work is important and influential for economic growth and development, poverty and health, and related areas.

I can’t help poking a little fun at the economics profession, however. You may have heard the joke that economists used to win the Nobel prize for explaining to the general public something that previously only economists understood, but now they win it for explaining to their fellow economists something that the general public has always known, e.g.:

  • Politicians care about themselves (Buchanan).
  • Don’t put all your eggs in one basket (Markowitz, Miller,and Sharpe).
  • You can’t fool all of the people all of the time (Lucas).
  • Some people know more than others (Akerlof, Spence, Stiglitz).

Deaton’s major insight: aggregate measures of consumption and inequality conceal important differences among individuals.

12 October 2015 at 11:10 am 6 comments

Older Posts


Nicolai J. Foss | home | posts
Peter G. Klein | home | posts
Richard Langlois | home | posts
Lasse B. Lien | home | posts


Former Guests | posts


Recent Posts



Our Recent Books

Nicolai J. Foss and Peter G. Klein, Organizing Entrepreneurial Judgment: A New Approach to the Firm (Cambridge University Press, 2012).
Peter G. Klein and Micheal E. Sykuta, eds., The Elgar Companion to Transaction Cost Economics (Edward Elgar, 2010).
Peter G. Klein, The Capitalist and the Entrepreneur: Essays on Organizations and Markets (Mises Institute, 2010).
Richard N. Langlois, The Dynamics of Industrial Capitalism: Schumpeter, Chandler, and the New Economy (Routledge, 2007).
Nicolai J. Foss, Strategy, Economic Organization, and the Knowledge Economy: The Coordination of Firms and Resources (Oxford University Press, 2005).
Raghu Garud, Arun Kumaraswamy, and Richard N. Langlois, eds., Managing in the Modular Age: Architectures, Networks and Organizations (Blackwell, 2003).
Nicolai J. Foss and Peter G. Klein, eds., Entrepreneurship and the Firm: Austrian Perspectives on Economic Organization (Elgar, 2002).
Nicolai J. Foss and Volker Mahnke, eds., Competence, Governance, and Entrepreneurship: Advances in Economic Strategy Research (Oxford, 2000).
Nicolai J. Foss and Paul L. Robertson, eds., Resources, Technology, and Strategy: Explorations in the Resource-based Perspective (Routledge, 2000).


Get every new post delivered to your Inbox.

Join 509 other followers