Research Interests and Papers
Corporate Social Responsibility | Economics of Religion | Miscellany
Corporate Social Responsibility:
“Sustainable Entrepreneurship” in Historical Perspective: Win-Win Innovations, By-Product Development, Externalities, and the Porter Hypothesis
In this working paper written with Pierre Desrochers and Frederic Sautet, we examine some market responses to supposed market failures, specifically waste products. In recent contributions to the literature, Cohen and Winn (2007) and Dean and McMullen (2007) suggest that an “environmental entrepreneurship” paradigm requires viewing market failures as potential entrepreneurial opportunities. Using historical evidence such as a survey of nineteenth century applied chemistry manuals and case studies of the British alkali and American meat packing industries, we suggest that that insight has long been a reality, most notably through the creation of valuable by-products out of polluting industrial residuals and that, contrary to the “Porter Hypothesis” (according to which well-designed regulations can promote more sustainable industrial behavior), most environmental problems can be better solved through entrepreneurship than government regulation.
Fair Trade is Counterproductive and Unfair: Rejoinder
In this paper published in Economic Affairs, my co-author David Henderson and I respond to a criticism of Henderson (2008) by Alastair Smith. Our conclusion is that Henderson’s basic case, although nicked around the edges by developments since the original was written, still stands. Moreover, we point out that Smith’s criticism of Henderson’s point that Fair Trade could help kill the banana actually supports Henderson’s case. Finally, Smith’s proposed ‘trade, not aid’ solution does not contradict Henderson (2008). Refusing to buy Fair Trade coffee and other products and, instead, buying quality coffee and other products would not reduce trade, as Smith seems to imply.
Is Fair Trade in Coffee Production Fair and Useful? Evidence from Costa Rica and Guatemala and Implications for Policy:
In this paper, published as part of the Mercatus Policy Series (and in a related article in TCS Daily), I examine the viability of Fair Trade as a customer-driven attempt at foreign aid. Fair Trade promises to help the poor coffee farmer ascend from the depths of poverty. While I applaud the effort as a private effort rather than a publicly funded effort, I harbor concerns about Fair Trade's efficacy. I spent time in 2005 and 2006 in Costa Rica and Guatemala talking to those involved in the coffee industry. (I thank Mercatus for providing generous funding for the research.) My intention was to examine and measure the effects the Fair Trade movement has had on the poorest in the coffee farming community. If Fair Trade can deliver on its promise, one would expect to see farmers standing in line for certification. Yet no line exists. Instead, less than 2% of the coffee produced in Costa Rica, and less than 2.3% in Guatemala is Fair Trade certified. Why? The Fair Trade premium on high quality coffee is relatively low as compared to the market price of specialty coffee, and often is not worthwhile when you consider the costs of changing the organizational structure to fit the requirements for certification. There are no apparent barriers to becoming certified, other than the cost of inspection by the certifying agencies and the cost of reorganization. In some cases the cost of reorganization is significant, and in others quite minor.
Coffee fields on the side of Volcan Poas in Costa Rica.
Fair Trade advertises itself as a way wealthy consumers can assist the poor coffee farmer. In Costa Rica and Guatemala,I found that the Fair Trade premium appears to flow through the organizational chain to the individual land owner/farmer in general. According to Fair Trade regulations, the farmer is the owner of a small family farm with no permanent full-time employees. These farm owners sell their coffee to mills for processing and in return receive a 'fair price' for their coffee. This does appear, on average, to be the way things actually do work in both countries. However, the small landowner is not the poorest segment of the coffee production line. In Costa Rica, coffee, like many other agricultural products, is hand picked by undocumented workers from neighboring Nicaragua, Panama and Colombia. In Guatemala, typically the indigenous Mayan population makes up the preponderance of the seasonal labor. These workers are not wealthy enough to own land of their own, making them the poorest segment of the industry. Because Fair Trade is targeted at the small landowner, it is missing the neediest people in the industry.
Colleen with Nelson Vargas, owner-operator of La Familia Microbeneficio
located in the Los Santos region of Costa Rica.
Pictured behind Don Nelson is his father, who originally started the farm.
The Economics of Religion:
Current Literature and New Directions
While economics has long recognized the importance of the institutional settings in which decisions are made, it has neglected to give much time to the most pervasive institution of all: religion. However, religion continues to strongly influence the decisions of individuals, governments and religious 'firms' in every corner of our planet. This working paper, to be posted soon, constitutes a survey of the current literature, using Iannaccone's 1998 paper as a base from which to begin. After a brief introduction to the scientific study of religion, I focus on current contributions to this dynamic subfield. I also explore those fertile opportunities and methodologies which await the economist interested in furthering our understanding of the permeating affects of religion.
The Prophet Function:
An Economic Theory of Spiritual Capitals
I am co-authoring this working paper with Larry Iannaccone. In it, we explore the factors by which perfectly ordinary places acquire spiritual significance, becoming sacred capitals. We examine the tremendous influence such capitals have on the secular institutions by whose side they operate, and how such places help to shape secular choices. In particular, this paper explores the circumstances surrounding the rise and fall of the Delphic Oracle through analysis of recorded oracular responses. The Delphic Oracle gained stature as the preeminent source of divine information following the Dark Ages in Greece, playing a part in the Trojan War, the Theban War, in the fortunes of the Theban Royal House, in the voyage of the Argonaut, and in deeds of Herakles and Theseus. Evidence suggests Delphi’s importance varied with the degree of state control, which affected both oracular demand and supply.
Hostile Territory:
High Tension Religion and the Peddler
In this paper, published in the American Journal of Economics and Sociology (V.66, N5, Nov 2007), I examine one of the more unique attributes of high tension religions: the hostility its members engender. Scholars have long explored the role that reputation plays in the facilitation of exchange. Some attention has also been paid to the way in which religions serve as a proxy for reputation or a mechanism for enforcement. These reputational and enforcement mechanisms enhance the ability of the members of certain religious groups to perform economic roles where such secular based mechanisms are absent or fail. In this paper, I explore the ways in which hostility towards members of high tension religions makes them particularly well suited to the economic role of middleman. As illustration, I explore the particular case of the 19th century Jewish peddler in the young United States.
The Fall of Communism and the Rise of Starbucks:
The Making of the Specialty Coffee Revolution
In this working paper, co-authored with T. Clark Durant, we examine the explosion of the specialty coffee business. For generations U.S. coffee consumers have focused on price point, to the extent of placing tremendous pressure on Congress to take action to prevent the price of a cup of diner coffee from rising above 5 cents. Why then, in the late 1980's and 1990's, do we witness the amazing triumph of the coffee house and its expensive selection of gourmet specialty coffees? Suddenly, the US consumer feels the need to wait in line to spend nearly $4 for a double shot, skinny caramel macchiato. While prosperity certainly plays a role in the increased demand for luxury coffee, global circumstances also help to explain why the specialty coffee revolution was perfectly positioned to explode during this particular time. The end of the cold war and the worldwide defeat of communism led to the dissolution of the coffee cartel which dictated sales based on quantity rather than on quality.
Domaine Pas de Choix: Government Intervention in the Champagne Market
You are a wine connoisseur. You know your varietals and are careful to select your wines based on a firm understanding of the regions, climate and annual growing conditions. How do you feel about politicians selecting your champagne? In this working paper, my co-author Nikolai Wenzel and I explore the effect of government subsidies and regulation of champagne production following the destruction wrought on the region by the joint assault of the phylloxera epidemic and Kaiser Wilhelm's Army. Subsequent to the First World War, the French government subsidized the replanting of only certain varietals (the "Big Three", Pinot Noir, Chardonnay and Pinot Meunier), then locked their status into the new Appellation d'Origine Controlee (AOC) system, forever altering the incentives of wine growers. As a result, some indigenous varietals -- Arbanne, Fromentau (Pinot Gris), Marsanne, Petit Meslier, Pinot Blanc, even Gamay -- have become all but extinct in the region, except for the vineyards and bottles of a few traditionalists; these hold-outs are allowed to cultivate existing vines, but forbidden from planting new rootstock of grapes other than the Big Three. In this paper, we use insights from the New Institutional Economics and Public Choice theory to examine the unexpected consequences of government action, which have altered the options of champagne drinkers worldwide.