Ronald Coase: And Now His Watch Has Ended

It makes me very sad that another season of Game of Thrones has ended. It is tough to know that you can get seven seasons in and every time you are still just as sad that it is over. One of the consistent (and oddly relatable) themes in the show has always been “the Wall,” located in the far north of Westeros, manned and maintained by the Night’s Watch.

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The Wall has a lot of history behind it and at the onset of the show’s first season, we are made aware of its many shortcomings. It is incredibly undermanned and in a state of disrepair. With how important this wall comes to be, why did the citizens and governments of Westeros let it get to this point?

Ronald Coase’s research could provide some insight.

About the Winner

Ronald Coase was the 1991 winner of the Nobel Prize in economics for his “important contributions on the borderline between economics, law and organization”. It seems like the committee had a hard time determining which of Coase’s contributions made him worthy of the Nobel. He was a brilliant individual, and though he wrote articles sparsely, his dozen or so articles were heavy hitters.

One of his seminal papers was The Nature of The Firm, which was published when he was only 27 years old. In that paper, he sought to understand why firms exist. He explained that the high transaction costs associated with searching for information and contracting between individuals, so firms are created instead to bridge the gap. Basically, it’s cheaper for people to acquire and produce stuff under one roof than it is to contract every little thing out.

Ronald Coase

The Problem of Social Cost

One of the other fields he wrote about was the notion of externalities and property rights. Externalities, sometimes referred to as social costs, are side effects of engaging in market transactions that affect parties outside of the market transaction. Negative externalities can be pollution, loud noises, ugly walls, etc. Positive externalities can come about from folks that make their front yards look nice or people that go to college.

One of the questions Coase asked was does it matter where the property rights are assigned, whether they are public versus private. Coase sought to answer this question when writing The Lighthouse in Economics, which looked at how lighthouses were managed in England during the 17th century. These lighthouses were important for helping ships get safe passage along the coast, and provided a huge positive externality in the process.

A lighthouse

What he found was the public operated and owned lighthouses were of poorer quality and often had trouble with being maintained. There was a change he noted when lighthouses started to be owned and operated by private individuals instead, who were not satisfied with the quality of service the publicly owned lighthouse. The huge public benefit was still intact, and whenever ships docked up at a local port, they would basically have to pay a lighthouse fee in order to dock there as part of the effort to keep the lighthouses in working order.

The Light is Fading

With the Wall, Coase would say the light has not been shining so bright. There is a positive externality being generated by the Wall in the form of protecting the people of Westeros from the threats beyond the Wall. However, as the years have passed, the perceived externality the Wall provides to Westeros has been steadily declining. As a result, the transaction costs associated with providing the Wall with the proper resources have increased.

As the transaction costs associated with the Wall go up, the lords and the citizens of Westeros become less inclined to do their part in making sure that the benefit continues to exist. Fast forward to the time when Game of Thrones takes place, and we find out no one really seems to believe there are any threats “beyond the Wall.” This sentiment becomes apparent throughout the show’s seven seasons. (Maybe, there will be a change of heart soon?)

One of the largest problems that evolves because of this lack of faith is the cracks forming in the Night’s Watch. The institution of volunteerism is what enables the Night’s Watch to function. Being a member of the Night’s Watch used to be an honorable thing to do. However, when people stopped believing in the dangers from beyond, volunteering seemed to be less attractive. As a result, the Night’s Watch allowed for prisoners to be taken into their ranks. This only made joining the brotherhood less enticing, especially considering the men have to take on high costs to even be part of the group such as not having a family. As the member count of the Night’s Watch shrunk further and further, it became costlier for them to get the provisions they needed to properly attend to the Wall.

Second guessing volunteerism in the Night’s Watch has some harsh responses, just ask this poor guy.

How Do We Turn the Lights Back on?

So, how do we save the Wall from this fate we have found it in during the series? One of the main issues started with the fact that there was no clear ownership of the Wall. It was built during a different regime, and when that regime was overthrown, there lacked any clear idea of who was responsible for the Wall.

Coase’s solution to this would be to have clearly defined property rights. By assigning clear and defined property rights, it holds the property right owner accountable. Since this wall is supposed to provide all of Westeros with the benefits, you can assign right of maintaining the Wall to the Iron Throne. Assuming there is no Littlefinger to buy the Wall, complete privatization is not possible, what can we do?

Coase would also advocate for finding ways to capitalize on the externality. So for the Wall, they could capitalize on it by allowing people to pay to go on tours. They could also charge some money for you to take a piss off the wall where the famous Tyrion Lannister did so many years ago! Also, now introducing Wall climbing lessons, learn the ways of making the difficult climb up to the top of the wall! If only there was a real-life example of such a wall that lost its positive externality and a group was able to capitalize on its intrinsic values…. Oh, wait there is, don’t forget to book your next ticket to the Great Wall Of China here!

Further, a way to make being part of the Night’s Watch more attractive would be to allow the men in the Night’s Watch to take on wives. It gets lonely and cold out there on the Wall, just sayin’.

Coase’s research was vital towards understanding how people can interact with one another to solve complex problems. Coase is mainly responsible for the creation of the very popular subfield of Law and Economics. His ideas were so popular that he remains to be one of the most highly cited scholars to this day. Though his solutions to the problem of social cost could be vital to the betterment of the Wall, any solution may be too late.

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