Göran Skogh has been kind enough to allow us to post his dinner speech, including his vivid memoirs. Skogh held the speech after having been honored by EALE for his life-long commitment to law and economics and to EALE.
The 25th Anniversary of the European Association of Law and Economics
Dinner Speech 17 September 2009
Economics of Crime in the Past
and the Birth of EALE
A Personal view
Dear Friends of Law and Economics:
The European Association of Law and Economics, EALE, celebrates today its 25th anniver-sary. Its members can look back on a long row of successful research activities under the um-brella of the Association. Parallel to EALE there are independent international Law and Eco-nomics Masters and PhD programs. Bologna, Hamburg and Rotterdam run complete such educational programs. The Law and Economics movement flourish in many universities around the world. It is, therefore, a great pleasure for me to meet the many researchers here at the annual conference.
The annual conference of EALE is usually crowned with a gala dinner. Today’s dinner is unbeatable with delicious Italian food and an outstanding historical atmosphere; in a castle of marble; in the heart of Rome. We are grateful to Luissi University, to Roberto Pardolesi and his staff.
The current celebration is of special dignity for me personally. I just received a distinc-tion and an award from Eli Salzberger, President of EALE. The flattering description of my work requires responsive words of “Thanks”. I will, therefore, talk about some personal expe-riences during the years 1964-1984. Thus my story starts 20 years before EALE’s birth and 45 years back from now. I hope you will find it of interest to get some information about the old history of EALE. I will bring up three issues.
First, old friends in EALE kindly name me the “father” or/and the “mother” of EALE. At the annual dinner in Nancy 2003 I claimed that I am the mother, and that the father is still unknown. Of course, that was a joke. Now, I better tell more precisely what caused the birth. I will be as correct as possible, although my memory may fail in details.
Second, how could a poor and initially unmotivated person like me receive a PhD in “Economics of Crime” in 1974? There was no academic tradition in my family and Economics of Crime did not exist when my studies started in 1964.
Third, how was EALE’s birth related to my career, and how could the Association sur-vive?
In spring 1964 I finished a year of mandatory military service in the Swedish army. I returned home to the small Swedish town Värnamo, known for its furniture industry, glass products and design. It was nice to be home again, but I had a problem. I was 21 years old without any ideas on what to do in the future. Yet, I did not bother too much. The summer was wonderful in the family’s summer cottage at the Baltic Sea. In the middle of August, however, when the swimming and sailing season was over, I had to return home again because of lack of money.
The financial problem became acute. I had to decide what to do in life, i.e. to choose an education. There were various options. I left high-school with grades above average, but not good enough to be accepted as student of medicine or architecture, that were professions of high prestige in our family. There was no academic tradition in the family, and there was no strong pressure on me in that direction; my father was a furniture designer and my mother sculptured in clay and draw ornaments in glass. Both my sisters studied crafts and design. I showed no talent in that direction, they said.
I could get a job in town, or apply to one of many professional schools in the region. Finally, I had the option of free courses at one of the Swedish universities. I decided to go to the University of Lund that was rather close to home. Lund University had also a good and liberal reputation.
The academic term at Lund University started around September 1. Before that, I in-tended to stay home to save money. However, by mid August my father became irritated hav-ing me hanging around. He said to me to go to Lund and start at once.
We had in the family not discussed my economic situation before. My expectation was that my father should pay my studies. He made, to my knowledge, much money on furniture royalties. Later, I realised that he was good both in making and spending money. Anyway, he gave me a check on an amount that he expected to be enough for two quarters at the universi-ty. I was un-experienced and assumed it okey. I did not found the agreement binding, as he did.
Lund was an empty town when I arrived two weeks before school started. The excep-tion was the students’ pub “Atheneum”. It was full of students of all ages. They were arguing about everything. Most students showed to be radical and left wing. I got many new ideas and theories to think of. Macro economic theory and central planning, as an alternative to the market, were on the forefront. The free market economy that was appreciated by the entrepre-neurs in Värnamo had a bad reputation among the intellectuals in the pub.
I felt a need of more knowledge in political economy, and I wanted to post-phone the choice of profession. That made me sign up for the two first quarters of Economics.
Yet, I became disappointed and felt cheated. The first course was not in Economics. It was rather an introduction to elementary statistics, a description of “Business in Sweden” and one on “Social Welfare in Sweden”. I started to study. Statistics and Business were easy. A prob-lem was a book on Social Welfare. It was full of numbers on sick-payments, pensions, child support, etc. I found it boring, useless and seemingly politically biased in favour of the Swe-dish policy in power.
The exam came, and I failed on the Social Welfare part. I passed two weeks later. It is common that beginners fail at the first test. It was no big deal in the academy of Lund. How-ever, it was a chock coming home. I had failed and had no money left. I hoped for some mon-ey and sympathy from the family. But I received no understanding. My oldest sister was an exception. She knew the student-life by some own experience.
Most surprising to me was the reaction to my choice of topic. Politics had so far been taboo in the family discussions. “Economics” to my father now showed to be equivalent to “centralism”, “taxes” and in the end, “communism”. To my mother and sisters Economics was something evil that should be avoided. Technicians and economists use only one (the wrong) half of the brain and should, therefore, be encouraged to use the other part. Hence, I should study something nicer like Architecture, History of Arts or possibly Philosophy.
If I failed once more in Lund there was evidence enough, according to my father, that the best for me was to join the industry, e.g. the furniture industry there where they demanded labour. He wrote a check of the same amount as the first one. After that he pressed me towards the wall and shouted: “I will never pay anything more for your academic studies.” I believed him. He wanted to make me a craftsman as he was himself.
I continued with Economics the second quarter. Now the topic was “Micro Economics" based on a text-book by Richard Lipsey. This study opened a world to me. So far, learning was a matter of memorizing. Teachers taught how the world is. The testing and falsification of hypotheses, and the modern relativism was new to me. Lipsey´s introductory chapter on the scientific and elementary theory of science opened my eyes. Both the weakness and challenge of positive social science became apparent.
My father´s decision not to support my studies, and my unwillingness to remain dependent of him, made me run into financial problems again. The problem was, however, soon solved by a helping hand. 1965 there was a new study-financing system introduced by the Swedish Government. Earlier, students with wealthy parents received no support from the State. The students had to rely on the support from their families. After the study-loan reform loans with a State guarantee, and a low real interest rate, was offered to all students. The study-loan was important to me. It made me less dependent on my father, and I got time to study Economics that suddenly had become important to me. The studies went well and I received the level equivalent with a MA in 1968.
1968 was the year of student revolutions around the Western World. Lund was on the front. Most established authorities were questioned. The number of students also increased. Lund University was crowded and there was a shortage of teachers in Economics. This gave me and other un-experienced students an opportunity to earn money as temporary lecturer. The job was attractive to me, and I enrolled as a PhD student. As such I needed a theme of research. My choice of theme was “Straffrätt och Samhällsekonomi” (Economic Analysis of Criminal Law).”
That was an unconventional choice. Scientific treatment of crime and criminals was at that time a matter of Sociology, Medicine or Statistics, but not Economics. Criminal behaviour was assumed irrational and was treated as an illness of the criminal, or of Society. Radicals claimed, on the contrary, that criminals usually were rational and that punishments might be hard, but should be limited in time. Unlimited sentences and treatments had a tendency to become never ending and thus uncertain and arbitrary. Gunilla (psychologist, my girl-friend and soon my wife) was working with the treatment of criminals. She made me interested in the debate on rational criminality, with a start at a party 30 April 1969 where we first met.
Important for my choice of topic was also that my first students were students of Law. There was a tradition that students of Law should have some Economics as orientation. Espe-cially Tax Law and Competition Law were parts of the economic studies. Economic analysis of Criminal Law was not practiced.
The intension with my research was to examine how crime and criminals could be un-derstood by economic analysis. Welfare Economics was one possible approach. Here Gov-ernment maximizes total wealth or utility. This utilitarian approach got its modern, formalised version in the article “Crime and Punishment. An Economic Approach” by Gary Becker (1968). This article entered the Lund University Library just in time. It was very useful to me. The “benevolent dictator” balances and distributes the utility of the citizens. For instance, Brottsbalken (the Swedish Penal Code) could be understood as a balancing of costs of crime, policing costs and costs of penalties.
However, Government does not only calculate and distributes costs of crime. The role of the State is also to maintain Law and Order, which includes to limit private redistribution by monopoly, theft and rent seeking (Tullock, 1967, Buchanan 1975). The aim is to avoid disorder and anarchy. Hence, the role of the State needs to be analysed by other models.
A Hobbesian anarchy model seemed to me a more appropriate starting point when crime and legal order is in focus. A game theoretical model is, therefore, used in my dissertation (Skogh, 1973, and Skogh, and Stuart1982 a and b).
Our model has a given number of identical players (banana pickers) have in the model three strategies each. No property rights or Government protects the players. The players may; (a) search bananas to consume; (b) search for bananas that are hidden by others; (c) hide bananas collected by others. In a first non-cooperative Nash equilibrium all will be involved in searching and taking. If the game is co-operative and the contract is enforceable the players (Government) can collectively decide that: “A banana is owned by the player that has collected it.” Property rights are thereby introduced, and taking is an excluded strategy. Hiding and protection of bananas become unnecessary. The welfare increases because more resources can be used to enjoy time or bananas.
The development of Law and Economic in Lund was rapid. Professor of Law, Carl Martin Roos and I started in 1974 a joint Law and Economics seminar (Roos and Skogh 1975-1977). I finished my PhD (Skogh , 1973). “Priser, Skadestånd och Straff” (Prices, Torts and Pun-ishments) compares the different measures to control accidents. In the same year we arranged an international symposium in Lund. Leading scholars such as James Buchanan, Guido Cala-bresi, and Richard Posner contributed with comments and papers to a conference volume I edited (Skogh 1977 b).
The study-loan system mentioned above was invented by a young, smart and receptive economist, Ingemar Ståhl. He was employed professor 1968 at the Department of Economics where I studied. He became very interested in Law and Economics, and I was impressed by the new professor. It was also flattering that he was enthusiastic about my study of crime. We had lots of fun as well, both in class and private. He introduced me to persons in the Ministry of Finance. Soon I was working for a committee investigating crime forecasts in the budgeting process of the Ministry of Justice. A public investigation on minor thefts, especially shop-lifting, was started and I wrote an appendix on the social costs of shoplifting (SOU 1971:10. Appendix 9). These contacts speeded up the dissertation that was ready in 1973.
In the middle of the 1970s problems appeared. The good and open relation to Ingemar Ståhl became complicated. I was financially depending on him and felt unsecure. Maybe, I should go for another job, but I wanted for family reasons stay in Lund, and the University was the only employer for a Law and Economist. Hence, I was locked in, which made my international contacts important.
After my PhD I visited the US several times. First, I went to the University of Chicago. I had no invitation or recommendation letter so I feared entry problems. I was well received, anyway. Here is an example; the Journal of Political Economy published a paper by Richard Posner (1975). The paper’s main point was that the social cost of a monopoly exceeds the traditional deadweight loss. There may, in addition, be a loss due to unproductive rent-seeking. In my PhD I made a similar point by use of a labour union example. That is, the ben-efit of a union may be lost by costs of forming and maintaining a cartel. I sent my union chapter to Richard Posner, who quickly arranged a seminar in Chicago Law School. Gary Becker and some other famous scholars were present. I was very nervous. Before the seminar I exer-cised in front of a mirror. The presentation seemed all right - until the audience started to ask questions. Suddenly, I felt completely lost, and I thought that the seminar was a complete failure. Nevertheless, they liked the paper and I was recommended to submit it to the Journal of Political Economy. There it was soon published after some revisions (Skogh, 1976).
Another important place was the Public Choice Center, Blacksburg, VA were I met James Buchanan and Gordon Tullock. They missed my announcement and seemed a little confused, but the hesitation vanished when they understood that I know their work and that I carried own interesting work. Thereafter, I have met Professor Buchanan several times. My family was once invited to his farm. Another time he stayed with us in Sweden. We went for a sailing tour, but there was practically no wind. He was satisfied with the slow motion, but he seemed more interested in the wild blackberries on the shore. Later, just after he received the “Nobel Memorial Prize in Economic Sciences”, I had the pleasure to invite Professor Buchanan to a great dinner at Grand Hotel in Lund.
The Birth of EALE
In April 1982 Gunilla and I got our third child. The Swedish Welfare System admitted either one of the parents to take paid care of the baby during the first year. It was allowed to stay abroad. That made it possible for me and the family to go to the US again. We went to Uni-versity of California at Santa Barbara for half a year. There I taught Law and Economics and completed several papers together with my friend and co-writer Charles Stuart (1982 a and b).
In the US I got time to reconsider the situation home in Sweden. I did not get full credit for my work, I thought. The support of Ingemar Ståhl was gone. I was pessimistic and ex-pected no chair in the future, independent of quality and quantity of my Law and Economics production. An alternative was to start my own business. I started, therefore, a small founda-tion “Forum för Rättsekonomi” (Forum for Law and Economics) and “Rättsekonomi i Lund HB” (Law and Economics in Lund Company). All remained small, however, partly because the European Association of Law and Economics came in between.
An organisation taking care of the Law and Economics interests on a European level came to my mind when I visited the US. On my way back to Sweden in 1983 I paid a visit to the Law and Economics Center at Emory University, Atlanta. Emory published a Law and Economics newsletter. Its mailing list included Europeans that were strangers to me. I wanted to contact these persons that seemed to have similar interests. It was self-evident to me that economists in Law Schools and lawyers in Economics Departments needed to support each other both in teaching and research. The European Union law and legislation required, in addition, a large number of economic investigations.
It was natural for me to take the initiative to the European Association. I had experience of several European countries, and of travel and work in the US. The seminars at Lund Uni-versity, including the conference in the hotel Lundia 1977 (see further the conference volume, Skogh, 1978), were also important. We received necessary financial support from the Mari-anne and Marcus Wallenberg’s foundation .
The first EALE conference was held at the study-centre “Sparta” in Lund, 19-21 March 1984. I was elected the first chairman. Several participants declare an interest in taking over the leadership the second year. Nonetheless, soon after the first meeting EALE had no leader-ship and no place to go for the second annual meeting. Without a second meeting in 1985 the baby would die, I thought. In this moment I got contact with Matthias Graf von den Schulen-burg working at Wissenshaftscentrum, Berlin. He became interested and together we organ-ised the second conference. The conference was a success. The interest was great both among European and American scholars. The conference volume became a mile stone in the history of EALE (Schulenburg and Skogh 1985).
The third conference was held in Oxford and the forth in Betanzos, Spain. EALE re-ceived some continuity and I felt that it was time for me to leave the leadership. Fortunately, there were excellent candidates. I was delighted suggesting a new leadership:
Roger van den Bergh , Chairman and Michael Faure, Secretary.
They kept a successful leadership for more than a decade. My own research interest moved from “Crime” to “Transaction Costs and Insurance”. My private business remained small, because Academia, EALE included, came in between.
The reason why EALE was founded, and still develops, is a real demand for its services. Eco-nomic analysis of Law is a challenge to both lawyers and economists. EALE coordinates re-search and contributes to the internal and external discussion. Here informal meetings – the gala dinner included -- have an important role. Do not forget, it is important to get together and enjoy life. Teaching, friendship and research come together.
The growth of organisations like EALE is due to macro processes that the individual does not influence, but the outcome is also a result of individual vision, control and effort. My efforts organising the first annual conferences were necessary, but not sufficient, conditions for the start and survival of EALE. I also held a watching eye later on. In that sense you may call me a “founding father”. It may remind you that EALE has a history. On the other hand, you shall not forget that there are many actors behind a success like EALE.
Announcement: The European Association for Law and Economics. The International Review of Law and Economics, pp. 223-227, no. 4, 1984.
Becker, G. S., “Crime and Punishment: An Economic Approach”, Journal of Political Economy, 169-217, 1968.
Posner, R. A., "The Social Costs of Monopoly and Regulation", Journal of Political Economy, vol. 83, no. 4, 807-827, 1975.
Skogh, G. “Straffrätt och Samhällsekonomi” (Economic Analysis of Criminal Law) Dissertation. Lund Universi-ty. Liber, Lund 1973 a.
Skogh, G., "A Note on Gary Becker’s Crime and Punishment: an Economic Approach", Swedish Journal of Economics, vol. 57, 305-311, 1973 b.
Skogh, G., "The Social Costs of Monopoly and Regulation: Some Comments", Journal of Political Economy, vol. 84, no. 6, 1319-1323, 1976.
Skogh, G. Priser, Skadestånd och Straff. (Prices, Damages and Punishments) Liber. 1977a.
Skogh, G. Editor Rättsekonomiska seminarier I, II, III. (Law and Economics Seminars I, II, and , III.) Depart-ment of Economics, University of Lund. Memoranda 1975:12, 1976:27, 1977: 33.
Skogh, G. Editor. Law and Economics. Report from a symposium in Sweden. Juridiska föreningen i Lund, no 28, 1978.
Skogh, G., "Public Insurance and Accident Prevention", International Review of Law and Economics, 67-80, 1982 c.
Skogh, G. and Stuart, C., "An Economic Analysis of Crime Rates, Punishment and the Social Consequences of Crime", Public Choice, 171-179, 1982 a.
Skogh, G. and Stuart, C., "A Contractarian Theory of Property Rights and Crime", The Scandinavian Journal of Economics, no. 2, 1982 b.
Skogh, G. Editor ”Law and Economics and the Economics of Legal Regulation”. Co-edited with Schulenburg, Matthias, Graf von den. Martinus , Nijhoff, 1985.
Skogh, G. ”En samhällsekonomisk mål-medel-analys av butikssnatterier.” (A National Economic-Aims-Means-Analysis of Shoplifting). SOU 1971:10 appendix 9.
Tullock, G. “The Welfare Costs of Tariffs, Monopolies, and Thefts”, Western Economic Jounal no 5, 224-232, 1967.