Distinguished economic historian Douglass North died today at the age of 95. This news comes only a few days after the death of Herbert Scarf. Kevin Bryan has written a crystal-clear post explaining the basic ideas behind North’s ccontribution to economics, in Bryan’s blog A Fine Theorem. They key paragraph is below, but I highly recommend reading the whole post.

That historical institutions develop largely to limit transactions costs is a major theme in North’s work, and this paper is a beautiful, highly formal, explication of that broad Coasean idea. Our motivating puzzle – why use formal institutions when reputation provides precisely the same potential for punishment? – can be answered simply by noting that reputation requires information, and the cost-minimizing incentive-compatible way to aggregate and share that information may require an institution. The Law Merchant arises not because we need a way to punish offenders, since in the absence of the nation-state the Law Merchant offers no method for involuntary punishment beyond those that exist in its absence; and yet, in its role reducing costs in the aggregation of information, the Law proves indispensable. What a beautiful example of how theory can clarify our observations!

The New York Times has an article on large outsourcing companies gaming the US H-1B visa application process. The nub of the article is this: “Many of the visas are given out through a lottery, and a small number of giant global outsourcing companies had flooded the system with applications, significantly increasing their chances of success.” The entire article is very interesting and reinforces the need for legislators and policy-makers to think about the unintended consequences of their actions.

In my first semester in the Ph.D. program at the University of Rochester (Fall 1984), I had the good fortune to be taught by Paul Romer. I took the Math for Econ course from him. In retrospect, I can see clearly what a deep thinker he was already at that time, by the way he presented convex analysis. If later I had not been enamored by William Thomson’s game theory / social choice teachings, I may well have followed Romer in studying growth for my doctoral dissertation.

In 1990, a paper that changed the way economists understand growth was published. The author was Paul Romer. This paper presented a crystal-clear model that incorporated the idea that ideas are non-rival goods (they don’t get depleted when they get used). This paper offered such a fundamental contribution to the economic theory of growth that many economists are celebrating the 25th anniversary of its publication. Here is the contribution, also crystal clear and in plain English, of Chad Jones, to this celebration.

This was a well-deserved award to Angus Deaton. As usual in the last few years, Tyler Cowen and Alex Tabarrok have timely, well-written explanations of the award. In the spirit of specialization, I refer you to them, where you will also find links to many other sources.

Tyler Cowen’s write-up; Alex Tabarrok’s write-up.

ADDED 2015-10-14: The Economist has a very good write-up, too.

Let them come and they will build it!

My former teacher Paul Romer has written a thoughtful post on how to help the millions of refugees who would relocate to Western countries, if only they were allowed to do so. I highly recommend following the link about to read it in full. His basic idea is to let the refugees build themselves cities. Cities are economic powerhouses; refugees want dignity and work, not only handouts for basic survival. Put these ideas together and prosper, Western countries.