Coase-ting toward a solution to the dorm dispute

I hate to bring up the Confederate dorm issue again, but it so nicely illustrates a principle of legal economics that I’m going to anyway. The latest news is that Dr. Eddie Hamilton, a black Vanderbilt alumnus, has offered $50,000 to the United Daughters of the Confederacy if they will allow Vanderbilt to change the name of the building. He’s encouraged others to chip in as well and the UDC has stated a willingness to “look at any offer on the table.” [Thanks to Chad for the update.]

Anyone who’s done some reading in the economics of law will recognize this as an illustration of the Coase theorem, which states that resources will be allocated efficiently regardless of the initial distribution of property rights (assuming there are no transaction costs). As long as this dorm dispute was tied up in the court system, the name was stuck as is. Bargaining has begun now that the appeals court has determined that the right to name the dorm belongs to the UDC. The transaction costs are not insignificant, but if there are enough Vanderbilt alumni who care about this aspect of the university’s image, the name will change.

The other interesting thing about this is that it makes the appeals court’s determination that Vanderbilt could void the contract for about $700,000 (the approximate value of the UDC’s donation in today’s dollars) nearly irrelevant. This was a somewhat arbitrary decision, but if the UDC’s reservation price is below that it doesn’t matter. The existence of a well defined property right forces each side to take the other’s interests into account: the UDC has to ask itself if keeping the name “Confederate Memorial Hall” on an increasingly progressive campus is worth the opportunity cost of whatever else it could do with a sizeable amount of money while the university community considers whether it’s worth compensating the group to change the name. Can we imagine any other situation in which Dr. Hamilton would voluntarily write a $50,000 check to the United Daughters of the Confederacy?

Debates about this stupid dorm have raged for years in the Student Government Association, op-ed pages, weblogs, and the courts. Perhaps people will finally be happy when they let the market decide the issue.

Comments

  1. Jeff says:

    Note that to a non-economist, the Coase theorem seems utterly ridiculous. First off, assuming that there are no transaction costs seems reminiscent of the physicist who, when attempting to predict the winner of a horse race, assumed that the horses were spheres and the track was frictionless. Also, if the late 19th century proved anything, it was that transactions among resource holders led to an absurd concentration of resources in the hands of the few (monopolies), which defeated the whole idea of the free market and led to massive inefficiencies in property distribution (not to mention government corruption).

    Also, we must define “efficiency” with regards to property distribution. What is efficient? Is it desirable from a moral standpoint?

    That having been said, I’m glad someone finally had the bright idea of buying out the UDC’s naming rights. To me, it’s more of a proof of the old axiom that “everyone has a price.”

  2. John says:

    What a great title for this post!

  3. Ben Stark says:

    While I’m not known as a lover of markets in all things, I’m with Jacob on this one. I’ve studies Coase some in my Property class and it seems to apply here.

    Of course, transaction costs may be a problem….they usually are the problem that screws up the idealized world of the Coase theorem. (By the way, Coase wasn’t using the theorem to argue for an entirely market solution to the world’s problems. He was using it to point out when government intervention was necessary and when it wasn’t.)

    Nevertheless….probably because I don’t have much of a moral stand on this issue….I like the Coasian operations at work in this case. It will leave the building name in the hands of those who want it most.

  4. Jacob says:

    Thanks for the defense, Ben. You’ve got it right. The “moral point of view” is inescapably contentious here. Since it’s just the right to name a building at stake here and both sides of the dispute are reasonably able to represent themselves at the bargaining table, let whoever values it most pay for it.

  5. Jeff says:

    Right. I was referring more to the general case of government involvement than to this specific one. Certainly there’s no moral imperative to building naming. (Well, I could construct one, but it’d just be for shits and giggles.)

    Doing some more Wikipedia reading… looks like Coase requires the number of people involved to be small too. Guess that means it doesn’t really apply to the macroscale case I was talking about in the first post. Hooray for talking past one another.

    My next question is this… where’s the externality in this case that creates the inefficiency that Coaseian economics is fixing?

  6. Jacob says:

    You could say that externalities are being internalized here, but an easier way to think of it is that having an established property right makes a trade possible where one wasn’t before. Without that, it was impossible to weigh how much one side values the name versus the other.

  7. Chad says:

    “Also, if the late 19th century proved anything, it was that transactions among resource holders led to an absurd concentration of resources in the hands of the few (monopolies), which defeated the whole idea of the free market and led to massive inefficiencies in property distribution (not to mention government corruption).”

    Jeff, not to bring a side point to center stage, but if the early 19th century proved anything, it was that strong alliances led to centuries of peace, which defeated the notions that preponderance of power, mutually-assured destruction, establishment of democracy, or resolution of territorial disputes could be useful forms of war deterrence. If Tim is reading this I’m sure I will be thoroughly [insert British term for berated] in due time… but in general our historical anticdotes are better left to serve as warning beacons of our insufficient innovations up to that point than to create justifications for admonition of all future attempts at similar activity.

    But really, I’m just being an ass without contributing anything valuable to this economic discussion. Apologies to all.

  8. Jeff says:

    The innovations that were lacking in the late 19th C. were checks against anti-competitive behavior and abuse of labor.

    Also, with regards to this comment: “In general our historical anticdotes are better left to serve as warning beacons of our insufficient innovations up to that point than to create justifications for admonition of all future attempts at similar activity.” Actually, I think history provides us with a pretty good guide for what not to do. If there was activity leading to injustice in the past, we would be well served to avoid such activities in the future.

  9. Patrick says:

    Why is this a black issue? Are the members of UDC racist? Is that why they persist in their mission? I read your various pieces on this and also that of Joel [del 8/29/05] who linked UDC and other such Confederate groups with holocaust deniers. That is sheer intellectual dishonesty on his part- I actually think I remember him from Boy’s State in Alabama. Maybe its the same guy. Anyway, I don’t understand what the deal is with Vanderbilt from a marketing perspective. They have the same problem as Emory. They think they can somehow compete with Yale, Harvard, etc on Yale and Harvard’s grounds. WAKE UP!!! This is aboslutely impossible. In the minds of Americans, best college mean harvard or Yale or Princeton- and so long as those schools exists and the NE economically lords it over the rest of the country- it always will. Pursuing that “progessive tact” (which is not progressive at all from a marketing standpoint, but rather the stupid uncreative, copy your already better opponent). Vandy will always remain, just as Emory, my alma mater, a second tier school in the minds of education consumers. So why not instead focus your marketing the Southern culture to be had in Nashville, Atlanta- market the South as a rich historical and cultural tradition- in fact the richest in the US. Why not build new relationship between the diverse groups of Southerners in relation to the old tradition instead of holding to a truely historically untenable story of noble abolitionists vs. unrepentant slaver beating racists.

    Emory is too far gone to help I think, but I see no reason why Vandy can’t about face and cash in on its Southernness. Southernness is the one commodity it has that Harvard doesn’t. It could market itself as THE best Southern university. In this way, it could actually make itself Harvard’s equal and even better, because in marketing terms people would begin to regard them as different goods, goods that can only be indirectly compared.

    Sure some people who know nothing about history might confuse the issue, but I seriously doubt the nation at large will look at Vanderbilt University as a racist institution for advertising its Southernness. And if they do, those people are clearly poorly educated and are not the caliber of individual schools like Vandy and Emory should desire.

  10. Joel H says:

    I was definitely at BS Alabama, although I can’t say I remember who you are off the top of my head. Refresh my memory on that point, if you please.

    The reason we can’t market “Southern-ness” (and keep in mind, I have nothing to do with the way my alma mater chooses to market itself) is that “Southern” does not tend to appeal to people from the West Coast or the NE, etc. It’s not that they necessarily equate the South with racism anymore (though that connection does still happen occasionally), but that they equate the South with all things bass-ackwards. The stereotype is slowly, slowly changing, but it can be hard for us to defend Nashville’s culture against the appeal of an NYC or a Boston or a Chicago. In other words, our Southern-ness is a commodity that we have and Harvard lacks, but it’s not always a valuable commodity in the minds of our consumers.

    We do try to distinguish ourselves from the Harvards and the Yales out there with other means, and that’s starting to work, I think. But the answer isn’t necessarily to highlight the advantages of living in the South, and sometimes, schools like Vandy or Emory or even Duke are going to have to in fact gloss over the disadvantages: the racism that does still exist, for example.

    This is a bit of a rambling response, and I’ll try to follow it up with something a bit more cogent later, but I’m using a hotel computer that seems in danger of shutting down at any moment, so I’m just going to post and say a prayer.

  11. Jeff says:

    Patrick – Neo-Confederatism has a nasty history of hatred attached to it. Most black people associate talk of things “Confederate” with the bigots who wrapped themselves up in the Stars and Bars in the ’50s. So even if the intention is to honor those on the ground who died thinking they were protecting their way of life (or whatever), it comes out looking a lot different.

    Keep in mind that, to the people running the show, the Confederacy was about slavery. When you wrap yourself in Confederate imagery, you’re sending the message that the world was better off when the black man was a slave. Not the message you want to send when you’re trying to tout Southern culture.

    True Southern culture is the blues, rock ‘n’ roll, jazz, gumbo, jambalaya, fried chicken and collard greens, folk, country, bluegrass, NC and Memphis barbecue… to concentrate on the Civil War is to ignore pretty much all that makes the South wonderful.

  12. Chad says:

    Joel and Jeff, I think I’m in agreement with both of you in arguing that Vanderbilt’s connection to the South can be a differentiable asset and, to that extent, is underutilized as a marketing tool. There are many things to admire about the South, and the challenge for Vandy is to find ways to harness the advantages without conjuring up ridiculous caricatures. I recall emails when I worked at the admissions office asking — with extreme disgust/condescension — every ridiculous question you can think of, from whether Vandy men wouldn’t be allowed into football games if they couldn’t find a date to whether it was socially acceptable to come to class barefoot. In that light, it’s easy to understand why the powers that be are tired of the protests and want to make what they consider to be a positive national statement about diversity by actively seeking a name change away from Confederate.

    Patrick, while I think Vanderbilt’s aspirations of national aspiration are lofty I’m hesitant to describe them as futile. These days the elite prospective student relies as much on guidebooks as on historical prestige, and such sources (U.S. News being the most prominent at present) are based on statistics that are not beyond manipulation. Indeed some have argued that schools like Cornell and Princeton achieved notoriety only after decades of coercive marketing tactics. Duke and Stanford are both newer than Vanderbilt and I would be hard-pressed to believe they were considered inferior because of their region. Absolutely Harvard has centuries of rich tradition behind it, but in today’s attention deficit society if a $20 billion endowment isn’t enough to buy a perpetual tradition I don’t know what is. Even the Harvard-Yale football game is only still referred to as “The Game” by professional sportswriters in jest, and certainly not out of respect for the talent level of the players, if this is any indication of the fluidity of tradition. Higher education is a game of perception, not tradition, which is why the U.S. has over 2000 (or is it 4000?) institutions of higher learning, most of which cost less than $1000/semester, and still we believe colleges are all overpriced and overcompetitive based on the statistics of the top 50.

    But I’m rambling. Let me just finish by returning to my excessively sarcastic/contentious comment to Jeff. I agree that history is absolutely essential to give us perspective on how to handle future events. I’m just saying it’s one tool among many (and defintionally speaking it’s an outdated one at that!) but that we limit ourselves if we view history as an instruction manual from which we must not deviate.

    Cheers.

  13. Anonymous says:

    I am sure no one will read this given that it is so far down the line, but just in case I will respond.

    What exactly IS Vandy’s marketing strategy? And how is it working? You know, the reputation for our schools- not so much Vandy I think yet, though its growing, is that they are where the kids go who didn’t get into Harvard, Yale and Princeton. If the goal of your school is to get the best talent, then you are clearly losing once you have this market reputation.

    Also, perhaps currently the Confederate symbols insprie anger and suspicion of racism, but I hitnk this is chnaging and will change drastically over the next couple decades. As the federal government continues to centralize, there will be secession movements, I’d imagine California first, maybe the Northwest, Washington and Oregon. Follow the numbers: currently is ratio citizen to representive is 660,000 to 1. In a few decades that will increase to 1 million to 1. This is not democracy and I simply cannot see the United States continuing to exist at that scale. I expect regionalization, the Pacific West begin the first to want to escape the tyranny of DC. Secession will soon take on a whole new reputation and if they use THE secession flag (whch was used in Scotland resisting the Brits and eastern Europe resisting the Soviets), things will chnage. Also, I am working a magazine that, as one of its goals, will successfully steal back Confederate imagery from the racists. I am also working on a large novel entitled, The Black Confederate, which I hope will have similar effect. I believe all young nonracist Southerners should consider it something of duty to seize back our colors. But be that as it may, back to marketing.

    I really don’t see Vandy or Emory as having any sort of quality on the market other than they are ranked universities in US News magazine. What is special abot them? Why would you go there? What can you get there that you cannot get better elsewhere? Mind, I don’t say that Harvard is better than Emory or Vandy, but that is the perception onthe market. And you aren’t going to chnage the perception by saying, “Hey we are just as good.” Really what DOES Vandy have? Southerness!

    As to the Yankee NYers and SoCals I don’t feel my education was any better from having been spent around them. In fact, I would definitely argue that it was worse. The petulant, I didn’t get into Harvard thing, really should be classified as a disease. Hell give them some prozac or something. I found by and large the smartest, most motivated students at Emory were Southerners. Now I believe this is partly due to the fact that they have more to overcome to produce the test scores and grades to get in than Yankee NYers who have high school classes that solely devote themselves to scoring well on the SAT for months out the year. Thus, the southerners that get in tend to be more naturally gifted, but maybe this is just my own experience.

    Also, in terms of history, we cannot give into bad history. The civil war was NOT caused by slavery. Read Lincoln’s first inaugural. He says so in undeniably plain language. If he campaigned on an New England Millenialist Abolition ticket he NEVER would have been elected. Lincoln was just as Tom Dilorenzo’s The Real Lincoln paints him, A Hamiltonian, Clayite, Merchantilist. He needed the South to stay in because he needed their taxes to fund his massive corporate welfare schemes. He would only invade if the Southerners did not collect his duties (The morrill tariff). He says so in the first inaugural. We cannot allow people to go about obliterating Southern symbols because they do not understand history. Do you realize how tragic that is? Shelby Foote is right when he says, I know that many black people feel anger and resentment when they see that flag, but they are wrong.

    On your examples- Stanford. Stanford is in California. Clearly there is a market for a high flown West Coast College. The West Coast is so far from the East that they can market themselves as unique region and save on travel and other expenses and represent themselves as on equal footing with the NE by having their own college. Stanford is by the way named for a corrupt Union Pacific Monopolist. I don’t know that it got its money from his activities, but I wonder.

    Emory also has an incredibly large endowment, bigger than Vandy’s. This is in large part due to Coke. But it cannot buy a reputation and neither can Harvard. That is not how marketing works. Pepsi can throw all the money it wants into advertising and no one will belive that it is that much better than Coke. In fact, a good argument might be made that they woudl sell less Coke. The public might percieve them as desperate.

    Marketing is about strategy, not money, so endowments are not a prmiary consideration.

    On “the racism”. I have recently spent a year in New York city and I was shocked to find as many if not more racists and of all sorts but also racists against blacks. Racism exists everywhere and everywhere is something ot be dealt with. I don’t find it to be a problem that Duke should gloss over anymore than NYU or Harvard. I find Southern racism to be overstated when compared with my experience in the North. Not to say that there is not racism in the South, there is and there are groups such as the KKK that a symbol to that racism. The north has the racism, but lacks the symbol.

    Finally, I believe we are seeing a retreat of intellectual Southerners from Vandy and Emory. I met many Southern kids in NY, up there doing art, working in business, top notch kids who refused to go to either Emory or Duke or Vandy because they were filled with Yankees and Californians who are not like them, and filled with professors with power agendas that require you to take absurd classes about feminism and the Gay american experience all other sorts of things taht while they may be interesting to some people are not nearly as useful as reading ACTUAL history, economics, philosophy written by real scholars, most all of them dead.

    And in fact, I do think that Southerness would appeal to Yankees, even though I don’t see why it necessary to appeal to them in the form of a seconrate Harvard. I htink many Northerners might like a Southern college, maybe more focused on classical texts, more greek and Latin, different sort of history. People love variety. In fact, it is product suicide to market your product as all things to all people. I maintain that the best long run way for Vandy to gain market share is to market its Southernness. People would choose it. Especially intellectual Southerners. Hell, if it hadn’t been for the philosophy dept (which was unique in its history of philosophy perspective and is about to be obliterated by analytics), and one creatiev writing professor, I without question believe I should have gone to Alabama. I certainly would have had more fun there and met more young intellectuals from my culture to help advance and improve it.

    Joel, I believe it was you and I who worked on our party platform. I was in the purple city. I ran for governor and lost to the thin little religious green shirted kid.

    -Patrick

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