History in Institutional Research: What, Why, and How?

Brian S. SilvermanUniversity of Toronto

presented at the ESNIE WorkshopMay 20, 2015

2

The next 90 minutes

History and Institutional Research (75 minutes or so)

– What is distinct about historical research in the social sciences?

– Why do historical research on institutions?

– How do historical research on institutions? Analytic narratives Contextualized institutional studies

3

The next 90 minutes

History and Institutional Research (75 minutes or so)

– What is distinct about historical research in the social sciences?

– Why do historical research on institutions?

– How do historical research on institutions? Analytic narratives Contextualized institutional studies

Sustained applause (15 minutes or so)

– Standing is optional…

4

The next 90 minutes

History and Institutional Research (75 minutes or so)

– What is distinct about historical research in the social sciences?

– Why do historical research on institutions?

– How do historical research on institutions? Analytic narratives Contextualized institutional studies

Sustained applause (15 minutes or so)

– Standing is optional… …but recommended

5

The next 90 minutes

Examples:

– Bates (1998): Why did the international coffee cartel rise and fall when it did?

– Hansen & Libecap (2004): Why did the Dust Bowl occur in the 1930s drought, but not in the 1950s drought?

– Silverman & Ingram (2015): How did shipowners solve the agency problem vis-à-vis ship captains?

– Ingram & Silverman (2015): What (or who) determines whether a shipowner engages in the “morally contested” business of slave trading?

6

The next 90 minutes

Examples:

– Bates (1998): Why did the international coffee cartel rise and fall when it did?

– Hansen & Libecap (2004): Why did the Dust Bowl occur in the 1930s drought, but not in the 1950s drought?

– Silverman & Ingram (2015): How did shipowners solve the agency problem vis-à-vis ship captains?

– Ingram & Silverman (2015): What (or who) determines whether a shipowner engages in the “morally contested” business of slave trading?

7

The next 90 minutes

Examples:

– Bates (1998): Why did the international coffee cartel rise and fall when it did?

– Hansen & Libecap (2004): Why did the Dust Bowl occur in the 1930s drought, but not in the 1950s drought?

– Silverman & Ingram (2015): How did shipowners solve the agency problem vis-à-vis ship captains?

– Ingram & Silverman (2015): What (or who) determines whether a shipowner engages in the “morally contested” business of slave trading?

8

The next 90 minutes

Examples:

– Bates (1998): Why did the international coffee cartel rise and fall when it did?

– Hansen & Libecap (2004): Why did the Dust Bowl occur in the 1930s drought, but not in the 1950s drought?

– Silverman & Ingram (2015): How did shipowners solve the agency problem vis-à-vis ship captains?

– Ingram & Silverman (2015): What (or who) determines whether a shipowner engages in the “morally contested” business of slave trading?

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Standing on the shoulders of giants…

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Standing on the shoulders of giants…

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Standing on the shoulders of giants…

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Standing on the shoulders of giants…

The same shirt?

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Organizations and Institutions

Coase, Simon, March, Barnard, Williamson, Alchian, Demsetz, Klein, …….

North, Weingast, Wallis, Eichengreen, Spiller, McCubbins, Spitzer, …..

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Organizations and Institutions

Coase, Simon, March, Barnard, Williamson, Alchian, Demsetz, Klein, …….

North, Weingast, Wallis, Eichengreen, Spiller, McCubbins, Spitzer, …..

Greater prevalence of history-based

research;often an analytic-

narrative approach

Relatively little history-based

research

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What is distinct about historical research?

Reductionism Contextualism

Direct observation Experimentalism Ethnography

Remote sensing Multivariate statistics History

Source: Ingram, Rao & Silverman 2012

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What is distinct about historical institutional research?

Reductionism Contextualism

Direct observation Experimentalism Ethnography

Remote sensing Multivariate statistics History

Source: Ingram, Rao & Silverman 2012

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Why do historical institutional research?

Perspective

Implications for current phenomena

A route to think carefully about alternative modes of inference, outliers, significance

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How do historical institutional research?

Analytic narratives (Bates et al. 1998)

– Formal economic model

– Confront model with institutional detail; edit model

– Repeat as necessary

Contextualized institutional studies

– Analytic narratives with less obvious iteration; natural-language models

Aside: Comparative historical analysis (Mahoney 2004, 2010)

– Quantitative case analysis (Ragan 1987 etc.)

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Analytic narrative example:

Bates (1998) studies the International Coffee Organization (ICO)

The ICO was a cartel that regulated coffee exports from 1962 until 1989

– At first glance, appears to be a classic cartel

– But, several puzzles:

– Why start in 1962?

– Why collapse in 1989?

– Why was the U.S. a member? (US = chief importer of coffee)

20

Analytic narrative example:

Bates (1998) studies the International Coffee Organization (ICO)

The ICO was a cartel that regulated coffee exports from 1962 until 1989

– At first glance, appears to be a classic cartel

– But, several puzzles:

– Why start in 1962?

– Why collapse in 1989?

– Why was the U.S. a member? (US = chief importer of coffee)

History of the coffee industry - many attempts to cartelize

– 1900: Brazil dominates sets monopoly price attracts entry

– 1920s-1950s: efforts to regulate output and price; less successful after WWII

– 1962: ICO set up; US is member; very effective

– Brazil etc. frame the ICO as a bulwark against Communism

– 1962: State Dept.; Congress; General Foods haggle and agree to join

– 1989: Berlin Wall falls

21

Analytic narrative example:

Bates (1998) studies the International Coffee Organization (ICO)

The ICO was a cartel that regulated coffee exports from 1962 until 1989

– At first glance, appears to be a classic cartel

– But, several puzzles:

– Why start in 1962?

– Why collapse in 1989?

– Why was the U.S. a member? (US = chief importer of coffee)

History of the coffee industry - many attempts to cartelize

– 1900: Brazil dominates sets monopoly price attracts entry

– 1920s-1950s: efforts to regulate output and price; less successful after WWII

– 1962: ICO set up; US is member; very effective

– Brazil etc. frame the ICO as a bulwark against Communism

– 1962: State Dept.; Congress; General Foods haggle and agree to join

– 1989: Berlin Wall falls

Conventional cartel models don’t explain this

22

Analytic narrative example:

Bates (1998) studies the International Coffee Organization (ICO)

The ICO was a cartel that regulated coffee exports from 1962 until 1989

– At first glance, appears to be a classic cartel

– But, several puzzles:

– Why start in 1962?

– Why collapse in 1989?

– Why was the U.S. a member? (US = chief importer of coffee)

History of the coffee industry - many attempts to cartelize

– 1900: Brazil dominates sets monopoly price attracts entry

– 1920s-1950s: efforts to regulate output and price; less successful after WWII

– 1962: ICO set up; US is member; very effective

– Brazil etc. frame the ICO as a bulwark against Communism

– 1962: State Dept.; Congress; General Foods haggle and agree to join

– 1989: Berlin Wall falls

Conventional cartel models don’t explain this

“Chain store” models of entry deterrence don’t

explain this

23

Analytic narrative example:

Bates (1998) studies the International Coffee Organization (ICO)

The ICO was a cartel that regulated coffee exports from 1962 until 1989

– At first glance, appears to be a classic cartel

– But, several puzzles:

– Why start in 1962?

– Why collapse in 1989?

– Why was the U.S. a member? (US = chief importer of coffee)

History of the coffee industry - many attempts to cartelize

– 1900: Brazil dominates sets monopoly price attracts entry

– 1920s-1950s: efforts to regulate output and price; less successful after WWII

– 1962: ICO set up; US is member; very effective

– Brazil etc. frame the ICO as a bulwark against Communism

– 1962: State Dept.; Congress; General Foods haggle and agree to join

– 1989: Berlin Wall falls

Conventional cartel models don’t explain this

“Chain store” models of entry deterrence don’t

explain this“Chicago School” models of third-

party enforcement don’t explain this

24

Analytic narrative example:

Bates (1998) studies the International Coffee Organization (ICO)

The ICO was a cartel that regulated coffee exports from 1962 until 1989

– At first glance, appears to be a classic cartel

– But, several puzzles:

– Why start in 1962?

– Why collapse in 1989?

– Why was the U.S. a member? (US = chief importer of coffee)

History of the coffee industry - many attempts to cartelize

– 1900: Brazil dominates sets monopoly price attracts entry

– 1920s-1950s: efforts to regulate output and price; less successful after WWII

– 1962: ICO set up; US is member; very effective

– Brazil etc. frame the ICO as a bulwark against Communism

– 1962: State Dept.; Congress; General Foods haggle and agree to join

– 1989: Berlin Wall falls

Conventional cartel models don’t explain this

“Chain store” models of entry deterrence don’t

explain this“Chicago School” models of third-

party enforcement don’t explain this “Realist” models of

third-party enforcement don’t

explain this

25

Analytic narrative example:

Bates (1998) studies the International Coffee Organization (ICO)

The ICO was a cartel that regulated coffee exports from 1962 until 1989

– At first glance, appears to be a classic cartel

– But, several puzzles:

– Why start in 1962?

– Why collapse in 1989?

– Why was the U.S. a member? (US = chief importer of coffee)

History of the coffee industry - many attempts to cartelize

– 1900: Brazil dominates sets monopoly price attracts entry

– 1920s-1950s: efforts to regulate output and price; less successful after WWII

– 1962: ICO set up; US is member; very effective

– Brazil etc. frame the ICO as a bulwark against Communism

– 1962: State Dept.; Congress; General Foods haggle and agree to join

– 1989: Berlin Wall falls

The narrative of the ICO is best described by a combination of two models: --PPT model of domestic politics--model of raising rivals’ costs

26

Analytic narrative example:

Bates (1998) studies the International Coffee Organization (ICO)

The ICO was a cartel that regulated coffee exports from 1962 until 1989

– At first glance, appears to be a classic cartel

– But, several puzzles:

– Why start in 1962?

– Why collapse in 1989?

– Why was the U.S. a member? (US = chief importer of coffee)

History of the coffee industry - many attempts to cartelize

– 1900: Brazil dominates sets monopoly price attracts entry

– 1920s-1950s: efforts to regulate output and price; less successful after WWII

– 1962: ICO set up; US is member; very effective

– Brazil etc. frame the ICO as a bulwark against Communism

– 1962: State Dept.; Congress; General Foods haggle and agree to join

– 1989: Berlin Wall falls

The narrative of the ICO is best described by a combination of two models: --PPT model of domestic politics--model of raising rivals’ costs

Key Features of Approach:--formal models--self-consciously iterative

27

Contextualized institutional study example:

Hansen & Libecap (2004) study the U.S. Dust Bowl, 1930s

“One of the most severe environmental crises in 20th-century North America”

– Result of severe droughts/wind erosion; destroyed farmland in U.S. Midwest

– Conventional explanation: lack of investment in anti-erosion practices

– But two anti-erosion techniques were well known at the time: – Strip-fallow farming– Planting trees or bushes as “windbreaks”

– Why did farmers fail to use these?

28

Contextualized institutional study example:

Hansen & Libecap (2004) study the U.S. Dust Bowl, 1930s

“One of the most severe environmental crises in 20th-century North America”

– Result of severe droughts/wind erosion; destroyed farmland in U.S. Midwest

– Conventional explanation: lack of investment in anti-erosion practices

– But two anti-erosion techniques were well known at the time: – Strip-fallow farming– Planting trees or bushes as “windbreaks”

– Why did farmers fail to use these?

Hansen & Libecap combine deep historical insight with collective action lens

– How does wind erosion affect soil? Who gets hurt?

– Lack of investment = problem of externalities– Prediction: Smaller farms less investment in anti-erosion, and more erosion

29

Contextualized institutional study example:

Hansen & Libecap (2004) study the U.S. Dust Bowl, 1930s

“One of the most severe environmental crises in 20th-century North America”

– Result of severe droughts/wind erosion; destroyed farmland in U.S. Midwest

– Conventional explanation: lack of investment in anti-erosion practices

– But two anti-erosion techniques were well known at the time: – Strip-fallow farming– Planting trees or bushes as “windbreaks”

– Why did farmers fail to use these?

Hansen & Libecap combine deep historical insight with collective action lens

– How does wind erosion affect soil? Who gets hurt?

– Lack of investment = problem of externalities– Prediction: Smaller farms less investment in anti-erosion, and more erosion

– Detailed narrative of government efforts to encourage adoption of anti-erosion techniques in late 1930s (Erosion Control Work Group)

– Larger farms agreed to cooperate; smaller farms dragged their feet

– Compare 1930s drought to 1950s drought

30

Contextualized institutional study example:

Hansen & Libecap (2004) study the U.S. Dust Bowl, 1930s

“One of the most severe environmental crises in 20th-century North America”

– Result of severe droughts/wind erosion; destroyed farmland in U.S. Midwest

– Conventional explanation: lack of investment in anti-erosion practices

– But two anti-erosion techniques were well known at the time: – Strip-fallow farming– Planting trees or bushes as “windbreaks”

– Why did farmers fail to use these?

Hansen & Libecap combine deep historical insight with collective action lens

– How does wind erosion affect soil? Who gets hurt?

– Lack of investment = problem of externalities– Prediction: Smaller farms less investment in anti-erosion, and more erosion

– Detailed narrative of government efforts to encourage adoption of anti-erosion techniques in late 1930s (Erosion Control Work Group)

– Larger farms agreed to cooperate; smaller farms dragged their feet

– Compare 1930s drought to 1950s drought

Underlying cause of under-investment:Classic collective-action problem due to negative externatlities

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Okay, I’m convinced! How do I do this type of research?

Select a case– Usually, start with theory and then find cases

Construct or adapt a model (to attempt to explain the case)– Reasonably parsimonious; the choice of variables is important, and driven by the model

Collect and appraise source materials (primary and/or secondary)– Good historians do not stop when they find evidence in line with their expectations

Engage iteratively in analysis and narrative– Outliers matter!

Evaluate the results– Is the interpretation logical?

– Has the interpretation been confirmed by the data?

– Does it generate any generalizable insight?

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Managing Agency Problems in Early Shareholder Capitalism:An Exploration of Liverpool Shipping in the 18th Century

Brian S. SilvermanUniversity of Toronto

Paul IngramColumbia University

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Motivation for this study

Problem: Separation of ownership and control

Related research: asset ownership and incentives of economic actors

Our contribution: Study equity ownership in unusually “clean” setting– Vessel = “floating corporation” – Monitoring was difficult – Captain = CEO – Stakes were high!

Great variation in hazards across types of voyages– Would likely lead to different incentive-alignment mechanisms

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Liverpool and Transatlantic Trade

West Indies trade(textiles/rice/salt/Irish immigrants to WI andcolonies; sugar/cotton/tobacco back)

Slave trade(textiles/guns/jewels to Africa; human slaves to WI andcolonies; either empty or sugar/cotton/tobacco back)

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Liverpool in the 1700s: Timeline of Significant Shipping-Related Events

British restoration

1660 1680 1700 1720 1740 1760 1780 1800

pop.: 1000

pop.: 5000

pop.: 25000

pop.: 77000

end ofRAC Africamonopoly

end ofroyaltiesfor RAC

Liverpooldock opens

Canals/turnpikes link Liverpool toManchester etc.

war war war war war

Slave Trade SlaveRegulation Trade

Act Outlawed

36

Liverpool in the 1700s: Timeline of Significant Shipping-Related Events

British restoration

1660 1680 1700 1720 1740 1760 1780 1800

pop.: 1000

pop.: 5000

pop.: 25000

pop.: 77000

end ofRAC Africamonopoly

end ofroyaltiesfor RAC

Liverpooldock opens

Canals/turnpikes link Liverpool toManchester etc.

war war war war war

Slave Trade SlaveRegulation Trade

Act Outlawed

37

“Fitting Out” a Transatlantic Voyage

Purchase vessel (or repair vessel)

Hire captain

Advertise for 3rd-party cargo

Hire crew

Load goods

Sail vessel to N.Amer. destination

Arrive; deliver goods

Pick up goods for return haul

Sail vessel to origin

Arrive; deliver goods; pay captain and crew; receive payment from 3rd-party cargo-shippers

Purchase vessel (or repair vessel)

Hire captain

Assemble cargo

Hire crew

Load goods

Sail vessel to Afr. destination(s)

Arrive; trade goods for slaves

Sail vessel to N.Amer. destination(s)

Arrive; sell slaves; sometimes pick up goods

Sail vessel to origin (often without goods)

Arrive; pay captain and crew; receive goods and/or deposit letters of credit

Non-slave voyage – 8-10 months Slave voyage – 12+ months

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Captain’s compensation

Typical Liverpool-West Indies voyage:

Wage: £50 – £5/month * 10 months

Primage: £50-£100

– 1%-2% of cargo value– conditional on successful delivery

of cargo– sensitive to cargo price

Total: £100-£150($25,000

today)

Typical Liverpool-Biafra-West Indies voyage:

Wage: £70 – £5/month * 14 months

Commission: £200-£500– 4%-6% of sales revenue if captain

negotiates purchase as well as sale– 2%-3% otherwise

“Privilege” slaves: £70-£150– 100% of revenue from sale of 2-4

slaves– conditional on keeping slave mortality

below a specified ceiling

Total: £350-£650

($100,000 today)

39

Liverpool in the 1700s: Timeline of Significant Shipping-Related Events

British restoration

1660 1680 1700 1720 1740 1760 1780 1800

pop.: 1000

pop.: 5000

pop.: 25000

pop.: 77000

end ofRAC Africamonopoly

end ofroyaltiesfor RAC

Liverpooldock opens

Canals/turnpikes link Liverpool toManchester etc.

war war war war war

Slave Trade SlaveRegulation Trade

Act Outlawed

40

Liverpool and Transatlantic Trade

West Indies trade(textiles/rice/salt/Irish immigrants to WI andcolonies; sugar/cotton/tobacco back)

Slave trade(textiles/guns/jewels to Africa; human slaves to WI andcolonies; either empty or sugar/cotton/tobacco back)

Bonjour, mes amis…

41

Motivation for this study

Problem: Separation of ownership and control

Related research: asset ownership and incentives of economic actors

Our contribution: Study equity ownership in unusually “clean” setting– Vessel = “floating corporation” – Monitoring was difficult – Captain = CEO – Stakes were high!

Great variation in hazards across types of voyages– Would likely lead to different incentive-alignment mechanisms

Key hazard: threat of capture by enemy privateers during wartime– Difficult to contract for resistance to (or avoidance of) capture– Variation in risk across time and across routes

42

Liverpool and Transatlantic Trade

West Indies trade(textiles/rice/salt/Irish immigrants to WI andcolonies; sugar/cotton/tobacco back)

Slave trade(textiles/guns/jewels to Africa; human slaves to WI andcolonies; either empty or sugar/cotton/tobacco back)

Bonjour, mes amis…

Asides:InsuranceConvoysPrivateer stories

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Fig 4: Capture of Liverpool transatlantic vessels, 1744-1785

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Fig 5: Captain-ownership of Liverpool transatlantic vessels, 1744-1785

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Data – main sources

LIVERPOOL SHIPPING AND TRADE 1744-1786: A COMPUTERISED EDITION OF THE LIVERPOOL PLANTATION REGISTERS.

– Ship name –List/description of voyages

– Date of registration –Name of captain for each voyage

– Owners’ names as of registration –Voyage outcome [sank; captured;

– Owners’ occupations [spotty data] successfully completed mission]

– Ship’s physical characteristics

3,830 ship registrations between 1744 and 1784; 7,300 voyages

46

Data – Liverpool Plantation Register

VesselName: Ann and LucyStern: SquareType: SnowTonnage: 90Place built: HullYear built: 1738

OwnersJohn BloomEdward Bigland

MasterJohn Bloom

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Variables

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Captain ownership as function of voyage, vessel, and captain features

(errors clustered on captain; *** = p < .01; ** = p < .05; * = p < .10)---------- linear probability ---------- ---------- Logit ----------

Captains are more likely to be part-owners of their vessels during wartime, on triangle-trade routes.

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Performance – identification strategy

Focus on wartime triangle-trade voyages only

Key: these voyages take more than one year to complete Many ships depart during peacetime and are at sea when war breaks out

Question: is war a surprise?

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Performance after war “shock”: (difference of means test; *** = p < .01; ** = p < .05; * = p < .10)

51

Performance results: Taken as a function of Captain Ownership, cutoff #3

(logit; *** = p < .01; ** = p < .05; * = p < .10)

Captain-owned vessels are less likely to be captured than non-captain-owned vessels...although the statistical significance is low.

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So why not always have the captain be a part-owner?

53

So why not always have the captain be a part-owner?

Maybe asset-ownership increases the captain’s incentive to protect the vessel, but reduces his incentive to do other important things

Duration of voyage: Captain-owned vessels take longer to complete their voyage

Trying to sail safely to protect the vessel?

“Under-engaging” in cargo: Captain-owned vessels load fewer slaves relative to non-owned vessels

“Excessively” concerned with risk to vessel while parked along West African coast?

54

Summary of results

Captain ownership is significantly more prevalent for triangle-wartime voyages than for other types of voyages

Consistent with incentive-alignment-based prediction concerning alignment of captain’s incentives with those of land-lubber shipowners

Vessels with a captain owner are significantly less likely to be captured than those with a non-owner captain

Also consistent with incentive-alignment-based prediction

Vessels with a captain owner underperform on other aspects of voyage

Consistent with multi-task principal-agent prediction

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The Cultural Contingency of Structure Evidence from Entry to the Slave Trade in and Around the Abolition Movement

Ingram & Silverman

56

Why Study Georgian Liverpool?

1. Why study history at all?

2. Dirty Business

3. Theory: Culture * Network Structure * Status

Network & Status effects = f(Culture)

[Social movements influence Culture]

57

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“What! You hiss me? Hiss George Frederick Cooke? You contemptible money-getters! I banish you! There is not a brick in your damn town but what has been cemented by the blood of a negro! “

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Operationalizing the Anti-Slaving Norm

Years Identified by Drescher (1988) as “hot” for the abolition movement

Key variables for testing effect of abolition sentiment:--# articles discussing abolition of slave trade,, by year--# articles discussing nastiness of slave trade, by year--Drescher’s categorization of “hot” and “cold” years

60

Key independent vars:--Gentleman dummy--Merchant dummy--Other will be the omitted category

61

5920 Traders in Our Data

Number% of Traders

% that were Slavers

Other 2669 45% 24.5%

Merchants 3048 51.5% 33.6%

Gentlemen 207 3.5% 39.1%

62

.

The Trader Co-Investment Network

1001

1100

0010

3

2

1

4321

trd

trd

trd

voyvoyvoyvoy

110

010

001

100

4

3

2

1

321

voy

voy

voy

voy

trdtrdtrd

Tt = Xt∙XtT

Tt is a symmetric trader x trader matrix where cell cijt indicates how many voyages two traders have co-invested in in the past.

XtXt

T

210

120

001

3

2

1

321

trd

trd

trd

trdtrdtrd

Tt

63

Key independent vars:--# shipowning ties to slavers--# shipowning ties to non-slavers

64

65

Key independent vars:--# Sephton Corp ties to slavers--# Sephton Corp ties to non-slavers

66

67

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Aside: Were the Quakers Slavers?

 Non- Quakers Quakers

Number 5272 648

% Slavers 28% 38%

% Sephton Club

Members

4.2% 10.6%

% Gentlemen/ Esquire 3.2% 5.1%

% Merchants 51.0% 54.3%

% Other Status 45.8% 40.6%

Network at the End of Trading Career

Number of Ties 7.1 13.2

% Ties to Quakers 17% 20%

69

Two final benefits of historical institutional research:

New research extensions pop up like weeds!

– Diffusion of captain-ownership as a mechanism (organizational innovation)

– Development of the shipowner “identity” and professionalization of vessel operation

– Response to a declining industry – what do slave traders do when the slave trade is prohibited?

70

Two final benefits of historical institutional research:

New research extensions pop up like weeds!

– Diffusion of captain-ownership as a mechanism (organizational innovation)

– Development of the shipowner “identity” and professionalization of vessel operation

– Response to a declining industry – what do slave traders do when the slave trade is prohibited?

You will have great stories to tell at cocktail parties