Wednesday, February 24, 2010

West Virginia coal mines and Minnesota iron mines

So, combine an aside in Oliver Williamson's "The Economic Institutions of Capitalism" (Chapter 1, section 5: Economic Organization of the Company Town) with the ubiquitous Minnesota Public Television documentaries on the Iron Range, and I got to thinking. The Minnesota iron towns didn't seem to shake out as exploitave company towns the way so many coal towns did down south. There were plenty of towns founded by the owners of the mines up here, but not the company stores charging high prices, or rented housing costing miners their entire wage (that I'm aware of.) Why is that? Did it have something to do with the history of the timber industry in the area? Or was that actually the cases in some places, and I'm just not hearing about it?

Williamson argues that company owned housing and a company controlled monopoly on the local general store could improve efficiency in some circumstances: For housing, if the society isn't highly mobile (few cars) and the market is thin (remote area) workers buying their own housing is equivalent to making a firm-specific investment and they will therefore require either guarantees (of employment or housing buyback) or wage premia. Company owned housing avoids these deadweight losses.

For the company store, his options are a company owned monopoly, a franchise (auctioned either by the firm or the workers) or a worker owned co-op. The former obtained in many coal mining company towns, Williamson favors the latter two, and I'm not sure what Minnesota towns ended up with. (Most of the PBS programs focused on the bars, not the general stored. =)  )

The Minnesota iron range fits his criteria perfectly:
Assume the following: (1) A remote mineral resource has been located, the mining of which is deemed to be economical; (2) the mineral can be mined only upon making significant investments in durable physical assets that are thereafter nonredeployable; (3) requisite labor skills are not firm specific to any significant degree, but there are set up costs associated with labor relocation; (4) the weather in the region is severe, which necessitates the provision of durable housing for protection from the elements; (5) the community of miner is too small to support more than one general store; and (6) the nearest city is 40 miles away.
I have to check, but this Minnesota seems to fit these criteria as closely as anywhere in coal country.
Mobility and remoteness play a big role in Williamson's reading of the phenomenon. Perhaps Minnesota was less remote due to railway access? On the other hand, I can't imagine West Virginia coal mines _not_ having rail access. Maybe the concentration of multiple mines in one area created a large enough community of miners to not be "small?"

I suppose it's as good an excuse as any to go check out the Hennepin County Historical Society's library a block away from home. Probably not the best starting point for Iron range research, but hey, when they're only open 1-5pm I need a little extra incentive to get up and around in time. Seriously, getting up and functional before 5? That's a stretch.

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