Revising price history: consumer price index for Norway 1492–2018

ABSTRACT

The paper presents a new combined annual cost of living and consumer price index for Norway covering 1492–2018, indicating that Norwegian price history has to be revised. The new historical price index is constructed on a significantly richer data material, which also makes it cover a longer period of price history than the existing one. This is made possible by the compilation of quantitative data from numerous sources, mostly originating from the eighteenth, nineteenth and early twentieth centuries, with grain prices stretching back to 1492. The new combined cost of living and consumer price index is constructed by a Laspeyres approach with shifting baskets for commodities and expenditure groups.

The index makes it possible to follow annual inflation and deflation in Norway for a period of 526 years. When comparing to existing indices, the new series reveals that revisions are needed in Norwegian price history. These make the historical price development more in line with those of the neighbouring countries and more in line with the pattern of wholesale prices.     

Diamonds Are a Rebel's Best Friend

Many countries that produce rough diamonds have experienced a highly adverse pattern of economic development. In this article, we propose that the primary reason for the negative impact is that diamonds easily become the prize in predatory struggles between loot‐seeking rebels and more or less kleptocratic governments. In weakly institutionalised countries like Angola, the Democratic Republic of Congo and Sierra Leone, this theory works well, but it does not explain the impressive growth record of diamond‐rich Botswana and Namibia. For a deeper understanding of these countries’ success, we point at the crucial differences between kimberlite and alluvial mining and the effect of having the world‐leading firm De Beers as a partner. Indeed, we argue that in countries like Angola, diamonds can never be a major vehicle for sustained growth, although the ongoing Kimberley process for eliminating conflict diamonds probably has contributed to making several African countries more stable.     

When to accept a sequence of gambles

When is a sequence of gambles, which is initially rejected eventually accepted? The eventual acceptance is defined as a pair property between the utility function and the sequences of gambles. A sequence of gambles is accepted when the gambles follow a large deviation principle and the utility function is non-satiated and bounded from below in a certain way. The number of gambles required for acceptance is computed.     

Asset Specificity and Vertical Integration

Asset specificity is usually considered to be an argument for vertical integration. The main idea is that specificity induces opportunistic behavior, and that vertical integration reduces the cost of preventing opportunism. In this paper I show that asset specificity can be an argument for non‐integration. In a repeated‐game model of self‐enforcing relational contracts, it is shown that when parties are non‐integrated, increasing degrees of asset specificity make it possible to design relational contracts with higher‐powered incentives.     

The economic costs of biological predation

This paper developes a bioeconomic model to analyse the economic losses from the reduced harvesting of prey species resulting from an increase in the stock of a natural predator. Examples of large mammals creating economic damage are whales and African elephants. The economic losses depend critically on the actual management of the prey stock, although the three measures we develop are equal when the stock is managed so as to maximize the sustained economic rent from the prey species. Predation losses are illustrated by the case of the Northeastern Atlantic Minke whale, where the estimate of the average predation cost per whale in 1991–1992 is between $US 1780 and $US 2370, using Norwegian cost and earnings data. A ten percent stock increase is estimated to cause a loss of almost $US 19 million to the fishers of the prey species. If half of this cost were assigned to Norway it would be equivalent to 2.8 and 6.7 percent of the gross profits of the Norwegian cod and herring fisheries, respectively.     

The income effect and supplier induced demand. Evidence from primary physician services in Norway

A much debated issue within the health economic literature is whether physicians can induce demand for their services. The relationship between physicians' ‘nonpractice income’ and supply of primary physician services in Norway is examined. It is argued that, if inducement exists, physicians with a low nonpractice income who work in municipalities where competition for patients is high, compensate for lack of patients by inducing demand. This model is adapted to the institutional setting of the Norwegian primary physician services, where there is a fixed fee schedule. The analyses were performed on a large set of data, encompassing all primary care physicians in Norway who are remunerated per item of treatment. Data on output in practice were merged with information about nonpractice income from the tax forms of the physician and her/his spouse. In municipalities with high physician density, nonpractice income had no effect on the number of consultations per physician, or on the number of treatment items per consultation. The results are interpreted as evidence against the inducement hypothesis.     

Do Antitrust Laws Facilitate Collusion? Experimental Evidence on Costly Communication in Duopolies*

Bertrand supergames with non‐binding communication are used to study price formation and stability of collusive agreements on experimental duopoly markets. The experimental design consists of three treatments with different costs of communication: zero‐cost, low‐cost and high‐cost. Prices are found to be significantly higher when communication is costly. Moreover, costly communication decreases the number of messages, but more importantly, it enhances the stability of collusive agreements. McCutcheon (1997) presents an interesting application to antitrust policy by letting the cost of communication symbolize the presence of an antitrust law that prohibits firms from discussing prices. Although our experimental results do not support the mechanism of McCutcheon's (1997) argument, the findings point in the direction of her prediction that antitrust laws might work in the interest of firms.     

On the democratic legacy of colonialism

The article features a temporal approach to analyzing the impact of Western colonialism on contemporary levels of democracy. We present a new data set with dates of colonization, independence, and a colonizing event for all former colonies and dependencies that are regarded as countries today (143 observations). Our data, as well as the existing literature, suggest that the very heterogeneous era of colonization should be divided into an early ‘mercantilist’ wave and a much later ‘imperialist’ wave with quite different characteristics. We show that there is a strong positive effect of colonial duration on democracy, an effect which turns out to be driven primarily by former British colonies and by countries colonized during the imperialist era.     

Country size and the rule of law: Resuscitating Montesquieu

In this paper, we demonstrate that there is a robust negative relationship between the size of country territory and a measure of the rule of law for a large cross-section of countries. We outline a framework featuring two main reasons for this regularity; firstly that institutional quality often has the character of a local public good that is imperfectly spread across space from the core of the country to the hinterland, and secondly that a large territory usually is accompanied by valuable rents and a lack of openness that both tend to distort property rights institutions. Our empirical analysis further shows some evidence that whether the capital is centrally or peripherally located within the country matters for the average level of rule of law.