Research Interests and Papers
Corporate Social Responsibility | Economics of Religion | Miscellany

 

Corporate Social Responsibility:

Squandered Profit Opportunities? Some Historical Perspective on Industrial Waste and the Porter Hypothesis"

In this paper (forthcoming in Resources, Conservation and Recycling) written with Pierre Desrochers, 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.

The Problem with Fair Trade Coffee

In this paper published in Stanford University's Social Innovation Review, I show that while Fair Trade-certified coffee is growing in consumer familiarity and sales, strict certification requirements are resulting in uneven economic advantages for coffee growers and lower quality coffee for consumers. By failing to address these problems, industry confidence
in Fair Trade coffee is slipping.

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.

A view of coffee fields planted on the side of Volcan Poas in Costa Rica

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.

A picture of Colleen Berndt with Nelson Vargas of La Familia Microbeneficio.

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.

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Economics of Religion:

Lessons from Delphi:
Religious Markets and Spiritual Capitals

This paper, co-authored with Larry Iannaccone and Jared Rubin, was published in the Journal of Economic Behavior and Organization (18 November 2010). In it, we develop a generalized theory of religious markets and apply its insights to archaic Greece, ancient Israel and modern America. Our starting point is a simple game-theoretic model in which secular leaders enhance their power by influencing the location of sacred places. The model includes standard equilibria - such as pure competition and state-sponsored monopoly - as well as a novel equilibrium, which we call the neutral nexus, wherein a sacred place gains widespread authority precisely because it lies beyond the centers of secular power. The nexus can promote competition, innovation, and exchange, especially where markets are weak and power is fragmented. It can also sustain random divination - a surprisingly effective way to manage conflict and risk. The sanctuary of Delphi illustrates the real work relevance of the neutral nexus, as does Israel's tabernacle of Shiloh.

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.

Miscellany:

Regulating Automobiles: The Consequences for Consumers
In this working paper published by the Mercatus Center at George Mason University, Derek Thieme and I examine how regulations impact purchasers of automobiles. We find that while the goals of regulation are lofty, they are not always acheived. Additionally, the costs of regulation borne by the consumer, and borne most heavily by those least able to absorbe the extra cost, are seldom taken into consideration.

Regulation in the Pulp and Paper Industry: Costs and Consequences
In this working paper published by the Mercatus Center at George Mason University, Derek Thieme and I examine the costs of regulation in the pulp and paper industry, the most burdensome of which are environmental and health and safety regulations. Consequences include job loss, lower salaries, and reduced industry competition.

The Calculus of Consent: 50th Anniversary
In this paper, forthcoming from Laissez-Faire (No. 36-7, Mar-Sept 2012), Andres Marroquin, Nikolai Wenzel, and I examine the impact of this great work by James Buchanan and Gordon Tullock. This paper includes chapter summaries as well as a brief discussion of its continued importance to academic discussion.

The Fall of Communism and the Rise of Starbucks:
The Making of the Specialty Coffee Revolution
In this working paper, I 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.

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