One of the best ways to understand the modern world is to look back at history.
From the origins of government to the peacekeeping role of potatoes in the Old World, episodes from the past can explain a lot about why things are the way they are today. Kellogg researchers are no strangers to this notion. Below, they dive into history, uncovering nuggets of wisdom that have stood the test of time.
The dawn of government
Some of the earliest states we know about formed between 3900 and 2700 BCE in the Middle East region of Mesopotamia. But scholars have long debated why humans formed these first governments: was it powerful groups installing themselves as rulers to extract resources, or people uniting to solve common problems?
Leander Heldring, an associate professor of managerial economics and decision sciences, examined the extensive archeological evidence from this region to find an answer. With his collaborators, he looked at what happened when Mesopotamia’s main river shifted toward or away from settlements and how those ancient societies responded.
The team found that local communities tended to form states after rivers shifted away, rather than toward them. And the formation of new states was quickly followed by the appearance of “public works”—in this case, canals—designed to benefit local communities. Written records also reflected these changes, with a new word appearing in the tablets at this stage: lugal, a kind of bureaucratic title meaning “chairperson” rather than “chief.”
Heldring’s findings cast light on longstanding concerns about the purpose of government—exploitative or cooperative—that are very much still alive today.
“Every government in every country overreaches at times—sometimes egregiously so,” he says. “But if you view government’s basic ‘job’ as trying to do the right thing for its society, it becomes self-reinforcing: it helps structure everybody’s attitude towards cooperation in society.”
The peacekeeping potato
Among the many treasures European explorers brought back from the Americas in the 15th century, the humble potato was surely overshadowed. But once Europeans started cultivating their own potato crops around 1700, it not only revolutionized agriculture, but diplomacy as well.
That’s what Nancy Qian, James J. O’Connor Professor of managerial economics and decision sciences, found when she and collaborators overlayed the histories of potato cultivation and combat in Europe, North Africa, and the Middle East from 1400 to 1900.
In areas with climates suitable for growing potatoes, armed conflicts declined after 1700. After controlling for other factors, they found that 26 percent of the variation in conflict is explained by the variation in potato cultivation.
Qian can’t say for sure exactly why people swapped the sword for the spud, but she has a strong suspicion.
“Historically, agricultural land was the most valuable resource,” she explains. “If the land is able to produce more food per area, then food becomes cheaper—and if it’s cheaper, then the land is less valuable, and people don’t want to fight over it as much.”
The research shows how changes in food supply can ripple out to change the course of history.
“These historical jumps in agricultural productivity alter the landscape of human civilization in important and fundamental ways we haven’t really talked about,” Qian says.
An innovation depression
In the late 19th century, star inventors such as Thomas Edison and Guglielmo Marconi made headlines and fortunes with industry-defining discoveries like the light bulb and the radio. But by the mid-20th century, most technological innovation was happening inside industrial firms like Bell Labs or Xerox Parc.
Did the Great Depression play a role in this shift from individual inventors to corporate teams? Filippo Mezzanotti, an associate professor of finance, probed that question by looking at patent data from the first half of the 20th century.
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Mezzanotti and his collaborators found that the number of patents filed by independent inventors plunged in the 1930s and didn’t recover. In contrast, the decline in firms’ patents was much smaller and shorter-lived.
Inventors who had patents granted both before and during the Great Depression were more likely to move to a company; their names were still listed on their later patents, but the patents were assigned to firms. Without support from their usual investors, perhaps these inventors saw better prospects in a corporate environment.
The study suggests that the Great Depression acted as an “equilibrium switch” that pushed innovation into firms and illustrates how economic crises can transform the landscape of innovation.
“These are times when people are forced to rethink the way they’re organizing their life, their business, or their activity,” Mezzanotti says.
From assassination to antitrust
In September 1901, anarchist Leon Czolgosz shot President William McKinley in Buffalo, New York. Eight days later, McKinley died, and his vice president Theodore Roosevelt was sworn in as the new American leader.
While the two men shared a political ticket, they differed sharply on the main economic issue of the day: the growth of massive conglomerates such as Dupont, U.S. Steel, and General Electric. While Congress had passed the Sherman Antitrust Act in 1890, the anti-monopoly law was not aggressively enforced until Roosevelt took office.
A Kellogg professor of finance, Carola Frydman, used this historical event to empirically measure the effect of political discretion on economic regulation. The assassination provided an unusually clean demarcation between two regimes in which only one variable—the presidency, and the discretion over enforcement that comes with it—abruptly changed.
Frydman and her coauthors looked at stock prices of railroad and industrial firms, half of which had participated in recent mergers, in the week between McKinley’s shooting and death. While all NYSE stocks plunged in value by 6.2 percent during this period, companies engaging in anticompetitive activity saw their value swing 1.4 to 1.9 percentage points more than that of other firms. And the biggest swings in stock price happened in sync with good or bad news about McKinley’s health.
“Some say that economists have a taste for the dark, and I have to admit that if McKinley had been shot and died immediately, our analysis would be a lot less convincing,” Frydman says.
The episode underscores that enforcing existing laws may be more immediately impactful than writing new regulations—a relevant message for politicians seeking to reign in today’s monopolies.
“Getting new laws through Congress is not trivial,” Frydman says. “So let’s think more carefully about enforcement, and how much discretion there is to achieve whatever we think might be the best outcomes.”
How television shrunk the newspaper
It’s a tough time for local newspapers. Since 2005, 40 percent of all U.S. papers have shut down, and overall print newspaper circulation is down 70 percent. But research from Kellogg’s Michael Sinkinson suggests that the seeds of this decline may have been planted decades earlier when a new competitor—television—arrived.
With colleagues from MIT and Sciences Po Paris, Sinkinson, an associate professor of strategy at Kellogg, looked at what happened to nearby newspapers when a local television station went on the air in the mid-20th century.
Overall, the entry of television led to a 3.1 percent decrease in newspaper circulation, and a 3.3 percent decrease in subscription prices. Papers got thinner too; the total number of stories published by local papers dropped by 6.6 percent, largely driven by a 10 percent drop in local-news coverage.
The competition shifted America’s news diet to become more national, with ramifications for politics. The study found that counties in which local papers were competing with television also saw a drop in “split-ticket” voting, where people’s votes for local candidates started aligning more closely with their votes for national offices.
“Today, almost all levels of politics have become nationalized,” Sinkinson says, “We see the start of this trend in this era.”