FOR NJOSH ONLY

ECON 321 SPRING 2017:
INDIVIDUAL ASSIGNMENT 4
DUE FEBRUARY 1st, 2017 BY THE START OF CLASS

Honor Code: I guarantee that all the answers in this assignment, except those for the question specifically marked as a group discussion question, are entirely my own work. I have cited any outside sources that I used to create these answers in such a way that the TA or instructor can look them up.

Name or Signature for Honor Code: ______________________________________________

The table below is for TA use only.

Note: For a number of these questions, there is no single ‘right answer’. Any well-reasoned answer backed up with evidence will get the mark. Also, it’s fine for your answers to be short – sometimes even a single sentence is enough!

1. [Reading] For this question, you are asked to read PART OF the article, “Agency Problems in Early Chartered Companies: The Case of the Hudson’s Bay Company”.

You ONLY need to read PART of the article, from “A SYSTEM OF CONTROL” on p. 860 to “less likely to cheat” on p. 872.

Start:

Stop:

1. 1. Write a 3-2-1 report on the article using the form provided on the course web site. (12 marks)

1. 1. A ‘principal – agent’ or ‘agency’ problem is said to exist when a principal hires an agent to perform a task, but can only observe the result of the task, and not the effort of the agent. This gives the agent an incentive to ‘shirk’, or work at less than capacity. (“So sorry I only caught one fish this week, boss – I fished twelve hours a day, but the fish didn’t bite, honest!”) Based on what you have read, briefly explain how the Hudson’s Bay Company took care of its principal-agent problem. (2 marks)

Note: If you need more information on the nature of the principal-agent (or ‘agency’) problem, read the section of the article titled ‘Bearing the Charge Without Having the Advantage’, starting on page 856, which has a nice discussion of it.

1. [‘Raphing] The authors of ‘Indians, the Beaver, and the Bay’ needed to check that a fall in beaver skins traded at Fort Albany represented a fall in the beaver population, and not (just) a reduction in fur-trapping effort. Marten skins, also traded by the Indians, had a constant price in relation to beaver skins: 1/3 Marten skin per (Made) Beaver skin. Because of this, “harvests of marten and beaver should have moved together unless one of the species was being depleted” (p. 476). Since marten and beaver were caught together during the same activity, the amount traded of both should go up or down together, unless (say) beaver was becoming harder to find, in which case the amount of beaver would drop relative to marten.

The authors provide the relevant data as Table 2, but do not plot it (instead they report a correlation coefficient of 0.161). We’ll use a scatter or ‘x-y’ plot to analyze whether beaver and marten skins went up or down together.

For your convenience, I’ve reproduced Table 2 and created a new table with fewer data points for students doing this question by hand. I have also plotted the data as a line graph, so that you can see how the harvests changed with time.

1. Create a scatter plot for the Table 2 data, with Beaver Skins on the horizontal axis and Marten Skins on the vertical axis. (If doing the graph by hand, use the shorter, 4-year table. If doing the graph with Excel, use the full year-by-year table.) Your graph should have appropriate axis and main titles. (10 marks)

1. Is your graph consistent with a fall in the beaver population? Is it possible that the marten population increased, instead? Explain briefly. (Note: For full marks it is NOT enough to point out that there is no strong correlation between the two series – you need to be able to argue for or against a fall in the beaver population) . (4 marks)

1. [Research] This question will teach you how to use archival searches in order to fact-check published articles. Unlike previous assignments, most of the records you’ll look up are NOT available online, so you are only responsible for finding the appropriate data set’s catalog number unless told otherwise.

Table 1 of ‘Indians, the Beaver and the Bay’ lists beaver skins and prices for Fort Albany, York Factory and Fort Churchill from 1700 to 1763. The source of the data is given as “MG20B Hudson’s Bay Company Archives (microfilm copy).

This designation is NOT very helpful, since it doesn’t narrow down the source. As the Archives of Manitoba (home of the Hudson Bay Archives) explains, “MG20” just means that the record is held at Library and Archives Canada, and “B” is the general designation for ‘Post Records’. Thus, “MG20B” translates to the very vague ‘we looked at Hudson Bay Company trading post records at Archives Canada’.

The same article quotes a 1716 letter from Thomas Macklish, the chief trader of Fort Albany, on pages 486 and 487. The source is given as “Davises, K.G., ed., Letters from Hudson Bay (London, 1965)”, p. 41.

Davies is NOT a primary source – Carlos and Lewis took their quote from a previously published book that had itself quoted another source, perhaps not completely accurately.

1. 1. 1. Suppose you don’t trust the article’s numbers, and want to check the source data for beaver skins and prices in 1730 for all three locations (Fort Albany, York Factory and Fort Churchill). Use the Hudson’s Bay Company Archives Online Finding Aids to find the three reference numbers (e.g. 1M272) that you would need in order to access the source data. Briefly explain why you chose these numbers, out of all the numbers available. (9 marks: 3 for the reference numbers, 6 for the explanation(s).)

1. 1. 1. The article only provides a secondary source for the letter from Thomas Macklish. It’s possible that the secondary source contains errors, so you’d like to check the primary source. Use the techniques you used in Part i. to find the reference number that would lead you to the original source for this 1716 letter from Fort Albany. Briefly explain why you chose this number. (3 marks: 1 for the reference number, 2 for the explanation)

1. 1. 1. Some of the post journals have been digitized, and are available online. Use the Manitoba Archives Keystone search to find the available post journals for York Factory. To do this, enter ‘York Factory’ as the search term, and tick the ‘Digital copies’ box. Find one of the digitized journals and look through its pages. Once you’ve done so, write down the Microfilm No. (this is the number you looked up in parts i. and ii. for other data) and a brief description of an important problem that would have to be overcome before the journal you looked like could be used for economic history research. (Put another way: suppose I had asked you to write a short essay on the contents of that journal. What would be the first big difficulty you would face?) (2 marks: 1 for the reference number, 1 for describing the difficulty)

Data for Question 2 (Also available as an Excel file – see Sample Answer)

Table 2: BEAVER AND MARTEN TRADE: FORT ALBANY, 1740 – 1763

(Reproduced from Carlos & Lewis, 1993)

References

Question 1

Ann M. Carlos and Stephen Nichols, “Agency Problems in Early Chartered Companies: The Case of the Hudson’s Bay Company,” The Journal of Economic History, Vol. 50, No. 4, 1990, pp. 853 – 875.

Available with a UVic connection or VPN at

http://www.jstor.org/stable/2122458

Financial Times, “Definition of principal/agent problem,” Financial Times Lexicon, http://lexicon.ft.com/term?term=principal/agent-problem

Question 2

Ann M. Carlos and Frank D. Lewis, “Indians, the Beaver, and the Bay: the Economics of Depletion in the Lands of the Hudson’s Bay Company, 1700 – 1763,” The Journal of Economic History, Vol. 53, No. 3, 1993, pp. 465 – 494.

Available with a UVic connection or VPN at

http://www.jstor.org/stable/2122402

MathBits, “Correlation Coefficient,” https://mathbits.com/MathBits/TISection/Statistics2/correlation.htm

Question 3

Ann M. Carlos and Frank D. Lewis, “Indians, the Beaver, and the Bay: the Economics of Depletion in the Lands of the Hudson’s Bay Company, 1700 – 1763,” The Journal of Economic History, Vol. 53, No. 3, 1993, pp. 465 – 494.

Available with a UVic connection or VPN at

http://www.jstor.org/stable/2122402

Online Finding Aids, Hudson’s Bay Company Archives: http://www.gov.mb.ca/cgi-bin/print_hit_bold.pl/chc/archives/hbca/resource/index.html

Document Reference Number information (from above):

http://www.gov.mb.ca/cgi-bin/print_hit_bold.pl/chc/archives/hbca/resource/post_rec/help.html#reel

Archives of Manitoba, Keystone Search:

http://pam.minisisinc.com/pam/search.htm

1 A correlation coefficient, or r, of 0.16 implies an r2 of 0.16 x 0.16 = 0.0256. That, in turn, means that only about 2.56% of the variation in beaver skins can be explained by changes in the trade of marten skins. If you use Excel to answer this question, and run a linear trend-line through the data, you should find that the r2 for the trend-line is 0.02554, confirming the correlation coefficient cited in the original article.