A 'Friend and Advisor': Management, Auditors, and Confidence in Germany's Credit Cooperatives, 1889-1914

Economic enterprises face two, related, managerial problems: effective management of the enterprise's activities, and communicating to outsiders that the enterprise is in fact well-run. These problems were especially difficult in the credit cooperative movement that grew up in Germany in the second half of the nineteenth century. These successful cooperatives thrived because they could harness the information and ties among local people to obviate many of the problems that faced other lenders. Doing so required managers who were themselves local people. Yet few if any locals had any banking experience, and most were not even familiar with basic accounting methods. These local managers created internal management problems and enhanced outside suspicion of the cooperatives as banking enterprises. The methods developed to overcome these problems relied on a combination of local initiative and regional assistance that was typical of the movement as a whole. The movement's ability to train its own talent suggests a broader impact not captured by statistics on membership or financial assets.credit cooperative, external audit

The Historical Fertility Transition: A Guide for Economists

The historical fertility transition is the process by which much of Europe and North America went from high to low fertility in the nineteenth and early twentieth centuries. This transformation is central to recent accounts of long-run economic growth. Prior to the transition, women bore as many as eight children each, and the elasticity of fertility with respect to incomes was positive. Today, many women have no children at all, and the elasticity of fertility with respect to incomes is zero or even negative. This paper discusses the large literature on the historical fertility transition, focusing on what we do and do not know about the process. I stress some possible misunderstandings of the demographic literature, and discuss an agenda for future work.fertility transition, long-run growth, Malthusian models, quantity-quality trade-off

Reputational Externality and Self-Regulation

Professional associations and other producer groups often complain that their reputation is damaged by other groups providing a similar but lower-quality service and that the latter should be regulated. We examine the conditions under which a common regulatory regime can induce Pareto-improvements by creating a common reputation for quality among heterogeneous producers, when the regulator cannot commit to a given quality. A common reputation can be created only if the groups are not too different and if marginal cost is declining. High cost groups and small groups benefit most from forming a common regime

Trust: A Concept Too Many

Research on "trust" now forms a prominent part of the research agenda in history and the social sciences. Although this research has generated useful insights, the idea of trust has been used so widely and loosely that it risks creating more confusion than clarity. This essay argues that to the extent that scholars have a clear idea of what trust actually means, the concept is, at least for economic questions, superfluous: the useful parts of the idea of trust are implicit in older notions of information and the ability to impose sanctions. I trust you in a transaction because of what I know about you, and because of what I can have done to you should you cheat me. This observation does not obviate what many scholars intend, which is to embed economic action within a framework that recognizes informal institutions and social ties. I illustrate the argument using three examples drawn from an area where trust has been seen as critical: credit for poor people.Trust, Social Capital, Credit Cooperatives, Uniform Laws

Social Class and the Fertility Transition: A Critical Comment on the Statistical Results Reported in Simon Szreter's Fertility, Class and Gender in Britain, 1860-1940

Simon Szreter’s book Fertility, Class, and Gender in Britain, 1860-1940 argues that social and economic class fails to explain the cross-sectional differences in marital fertility as reported in the 1911 census of England and Wales. Szreter’s conclusion made the book immediately influential, and it remains so. This finding matters a great deal for debates about the causes of the European fertility decline of the nineteenth and twentieth centuries. For decades scholars have argued whether the main forces at work were ideational or social and economic. This note reports a simple re-analysis of Szreter’s own data, which suggests that social class does explain cross-sectional differences in English marital fertility in 1911.fertility transition, 1911 Census of England and Wales

Moral Hazard in a Mutual Health-Insurance System: German Knappschaften, 1867–1914

The Knappschaft underlies Bismarck’s sickness and accident insurance legislation (1883 and 1884), which in turn forms the basis of the German social-insurance system today and, indirectly, many social-insurance systems around the world. The Knappschaften were formed in the medieval period to provide sickness, accident, and death benefi ts for miners. By the mid-nineteenth century, participation in the Knappschaft was compulsory for workers in mines and related occupations, and the range and generosity of benefi ts had expanded considerably. Each Knappschaft was locally controlled and self-funded, and their admirers saw in them the ability to use local knowledge and good incentives to deliver benefi ts at low cost. This paper focuses on a problem central to any insurance system, and one that plagued the Knappschaften as they grew larger in the later nineteenth century: the problem of moral hazard. Replacement pay for sick miners made it attractive, on the margin, for miners to invent or exaggerate conditions that made it impossible for them to work. Here we outline the moral hazard problem the Knappschaften faced as well as the internal mechanisms they devised to control it. We then use econometric models to demonstrate that those mechanisms were at best imperfect.Sickness insurance; moral hazard; malingering; Knappschaft; social insurance

Did the Cooperative Start Life as a Joint-Stock Company? Business Law and Cooperatives in Spain, 1869-1931

Studies of Spanish cooperatives date their spread from the Law on Agrarian Syndicates of 1906. But the first legislative appearance of cooperatives is an 1869 measure that permitted general incorporation for lending companies. The 1931 general law on cooperatives, which was the first act permitting the formation of cooperatives in any activity, reflects the gradual disappearance of the cooperative’s “business” characteristics. In this paper we trace the Spanish cooperative’s legal roots in business law and its connections to broader questions of the freedom of association, the formation of joint-stock enterprises, and the liability of investors in business and cooperative entities. Our account underscores the similarities of the organizational problems approach by cooperatives and business firms, while at the same time respecting the distinctive purposes cooperatives served.cooperative, general incorporation, business enterprise, freedom of association, freedom of contract

Moral hazard in a mutual health-insurance system: German Knappschaften, 1867-1914

This paper studies moral hazard in a sickness-insurance fund that provided the model for social-insurance schemes around the world. The German Knappschaften were formed in the medieval period to provide sickness, accident, and death benefits for miners. By the mid-nineteenth century, participation in the Knappschaft was compulsory for workers in mines and related occupations, and the range and generosity of benefits had expanded considerably. Each Knappschaft was locally controlled and self-funded, and their admirers saw in them the ability to use local knowledge and good incentives to deliver benefits at low cost. The Knappschaft underlies Bismarck’s sickness and accident insurance legislation (1883 and 1884), which in turn forms the basis of the German social-insurance system today and, indirectly, many social-insurance systems around the world. This paper focuses on a problem central to any insurance system, and one that plagued the Knappschaften as they grew larger in the later nineteenth century: the problem of moral hazard. Replacement pay for sick miners made it attractive, on the margin, for miners to invent or exaggerate conditions that made it impossible for them to work. Here we outline the moral hazard problem the Knappschaften faced as well as the internal mechanisms they devised to control it. We then use econometric models to demonstrate that those mechanisms were at best imperfect.sickness insurance, moral hazard, Knappschaft, social insurance

Mortality in the North Dublin Union During the Great Famine

Responsibility for the tremendous excess mortality associated with the Great Irish Famine of 1846-51 is a continuing topic of debate. One view blames an inadequate government response for much of the tragedy. These debates are hampered by a lack of detailed information on how well relief efforts performed at a local level. Excess mortality ranged from one quarter of the entire population in parts of the west to negligible levels along much of the eastern coastline. Much of this cross-section variation reflects relative wealth. But another theme in the historiography stresses the importance of sympathetic or negligent local figures such as a landlord or priest. This study addresses the question of local agency with a case study of the North Dublin Union, the administrative unit responsible for administering the Irish poor law in the northern half of Dublin city and some adjacent parishes. North Dublin Union is unusual for the quality of its surviving administrative records. We use those records to study the Union's day-to-day functioning during the famine and to estimate mortality rates in the workhouse during the crisis. We find that the tremendous mortality of the North Dublin workhouse inmates during the famine primarily reflects the crisis outside the workhouse's walls; the guardians and managers did reasonably well in preserving human life under these trying circumstances.Ireland, famine, mortality, workhouses