Did Chinese coolies on the Yangtze pay someone to whip them? (Academic urban legends)

Once upon a time, Chinese coolies pulling a barge up the Yangtze paid someone to whip them.

So goes a widely repeated story attributed to Steven Cheung.

This story is probably most exuberantly told by Michael Munger in an EconTalk podcast ("Munger on the Nature of the Firm", 2008):

Michael Munger. There's a famous example in China, where a group of coolies ... have to pull a barge up the Yangtze River ... There's a trade-off ... how do you make the 30 guys work hard? The insight of the team production problem is we need ... division of labor. ... If I'm pulling, I can't spend my time watching you and you can't spend your time watching me. We'll create a new job, called the monitor. ... We'll give the monitor a whip. Now this looks like slavery. The great thing about this, and this is from an article by an economist named Steven NS Cheung. He found that this guy with a whip—and this is the most incredible thing Russ!—this guy with a whip was hired and paid by the coolies!

Russ Roberts. Not by the ruthless profit greedy boss.

Michael Munger. These were not slaves. It wasn't the barge owner who hired them. This was the group of coolies. ... There's no division of labor internally. They all pull. ... The only problem is team production. But in competing with other groups of manual laborers, they found it to their advantage, they can make more money if they hire this specialized person called the monitor and if they gave him a whip. Because if he really is diligent, if he works hard, he'll never use the whip.

Russ Roberts. Yea that's the irony. You pay him a huge sum of money ...

Michael Munger. More than any of us make.

Russ Roberts. ... to discipline the group and yet the ideal is he never earns a penny of it. (Chuckles.)

Michael Munger. Because I know he's motivated. Since I've paid him a lot, I know he's motivated. I'll pull, confident that you will pull too, Russ.

However, here's what Cheung (2018) himself has to say about this story:

In 1970, Toronto’s John McManus was my guest in Seattle. I chatted to him about what happened when I was a refugee in wartime Guangxi. The journey from Liuzhou to Guiping was by river, and there were men on the banks whose job was to drag the boat with ropes. There was also an overseer armed with a whip. According to my mother, the whipper was hired to do just that by the boatmen!

My tale went the rounds, and it was seized by a number of neo-institutional economists. I tried to dissuade McManus, tell him not to publish his piece based on my Guangxi story, but he went ahead nonetheless. (See his “The Cost of Alternative Economic Organizations”, Canadian Journal of Economics1975). In 1976 Jensen and Meckling (1976) published a widely-cited paper in Journal of Financial Economics (“Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure”). As a result of all this, the Guangxi boatmen and their hired whippers gained posthumous fame. However, this could be a story invented by my mother – the smartest person I have ever known – to entertain a boy of seven!

Munger's use of this story is a good example of a common error made by economists—an error which was, ironically, warned against by Cheung himself in "The Fable of the Bees: An Economic Investigation" (1973):

My main criticism, rather, concerns their approach to economic inquiry in failing to investigate the real-world situation and in arriving at policy implications out of sheer imagination. As a result, their work contributes little to our understanding of the actual economic system.

Another critic of this error was Ronald Coase in "The Lighthouse in Economics" (1974). In "The Conduct of Economics: The Example of Fisher Body and General Motors" (2006), Coase wrote:

Facts are not like clay on a potter’s wheel, that can be molded to produce the desired result. They constitute the immutable material that we have to accept. ...

What is it about the conduct of economics that led these able and honest economists to embrace error? ...

it is the result of economics having become a theory-driven subject. ...

If it is believed that their theory tells us how people would behave in different circumstances, it will appear unnecessary to many to make a detailed study of how they did in fact act. This leads to a very casual attitude toward checking the facts. If it is believed that certain contractual arrangements will lead to opportunistic behavior, it is not surprising that economists misinterpret the evidence and find what they expect to find.

Instead of taking the time to study and verify the facts, the economist prefers to seize upon any purported facts and shoehorn them to fit her preferred theories and worldviews. "Never let the facts get in the way of a sexy and publishable theory" could be the economist's motto.

Of course, there exists the possibility that at some time in history, some workers some place did on at least one occasion hire a monitor to whip them. The problem is that we have zero evidence that this ever happened, other than a story a mother told to her seven-year-old son, who then repeats it decades later. A few decades further, the academic urban legend becomes an established fact that can be cited as evidence for one's preferred theories and worldviews (and ignored otherwise).

What's also troubling is that few have ever dared or bothered to question this story. I was able to find only two papers (below) that did so and even then probably only because the authors objected to the theory the story was used to support.

Morals of the story:

1. We as economists and social scientists need to be more critical towards any purported evidence, even when and perhaps especially when the evidence supports our cherished theories and worldviews.

2. It is not OK—indeed it's intellectually dishonest to cite a story as evidence when you know it might be false.

3. We need to call BS whenever we see it (and not just when the BS happens to challenge our preferred theories and worldviews).
Note: I personally don't care whether the story is true or false. What I do care about deeply is that many economists are ready to report it as fact even though there is not one iota of evidence for it.
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Writers who've repeated the story

McManus (1975) correctly reports the story as a mere anecdote (and moreover does so in a footnote):

Anecdote told by Steve Cheung: On the Yangtze River in China, there is a section of fast water over which boats are pulled upstream by a team of coolies prodded by an overseer using a whip. On one such passage an American lady, horrified at the sight of the overseer whipping the men as they strained at their harness, demanded that something be done about the brutality. She was quickly informed by the captain that nothing could be done: 'Those men own the right to draw boats over this stretch of water and they have hired the overseer and given him his duties.'

I suspect that McManus embellished the bits about (1) the American lady; and (2) the Yangtze River. (The route from Liuzhou to Guiping does not seem to be anywhere near the Yangtze River. And of course, the Yangtze River just so happens to be the one river someone non-Chinese will have heard of.)

Ironically and sadly, Cheung (1983) himself would print this story (and fail to provide any sources):

My own favorite example is riverboat pulling in China before the communist regime, when a large group of workers marched along the shore towing a good-sized wooden boat. The unique interest of this example is that the collaborators actually agreed to the hiring of a monitor to whip them. The point here is that even if every puller were perfectly "honest," it would still be too costly to measure the effort each has contributed to the movement of the boat, but to choose a different measurement agreeable to all would be so difficult that the arbitration of an agent is essential.

Cheung (1973) had written:

some economists have been distilling their policy implications from fables. In a desire to promote government intervention, they have been prone to advance, without the support of careful investigation, the notion of "market failure."

It seems that in his desire to promote the wonders of the market, Cheung reported as fact and "without the support of careful investigation" a story his mother told him as a seven-year-old.

With Clement and McCormick (1989), the story has become the "famous Chinese boatpullers fable", where "the monitor uses his vision, intuition, and experience to determine shirking, counseling the loafers with his whip."

Other writers that repeat the story include Ricketts (1990), Miller (1992), Watts (1992), Pejovich (1995), Donleavy (2005), Surdam (2010), and Munger (2019).

Ramseyer and Rosenbluth (1993) preface their greatly embellished version of the story with these remarks:

Every discipline has its fables. They may be true, they may be false; no one really knows. Given the pedagogic points they make, no one really cares.

This is exactly the spirit that Coase criticizes and which today pervades economics (and perhaps also other social sciences). 

 * * *

The only two papers I've found that question the story

Commenting on Ramseyer and Rosenbluth (1993), Johnson and Keehn (1994) write:

It evidently never crossed the minds of these savants of coolie motivation that their conclusion is so preposterous that it could be established (if at all) only empirically—by some on-the-spot discovery of a hitherto unknown guild of Chinese masochists. The idea that the coolies paid supervisors to whip them is not one that can be established deductively from theory. What is needed is evidence. Did the coolies actually have a choice, or were they perhaps members of a prison gang? Where and how did they hire their tormentors? Worthless research in academic political science is not new, but in the face of stern competition this seems to establish a new low. ...

Rational choice theory is unable to provide the demonstration that Ramseyer and Rosenbluth promise. In order to hold the theory together at all, the authors are forced to invent hitherto unknown practices as alleged features of Japanese life, much as they invented the coolies who hired people to whip them.

Falk and Kane (1998) quote Johnson and Keehn (1994) and add:

The fact that rational actor theorists intentionally ignore realities such as the nature of coolie labor would seem to discredit their ideas as a reliable means for examining international relations. The refusal of some theorists to acknowledge the possibility that people might act on the basis of motivations such as duty, honor, or community spirit flies in the face of history and, perhaps, personal experience. Those who have committed themselves to serve their communities or to defend their country in war may be entitled to find this proposition offensive.

Sadly (and as already mentioned above), these two papers seem to question the Chinese coolie whipping story only because they object to the theory the story was used to support.

 * * *

2020-12-29 update

In my experience, economists rarely ever admit to—much less willingly broadcast—their mistakes. They usually (i) ignore the criticism; (ii) fire back an angry response explaining why they did not make a mistake or why their mistake was no big deal; or (iii) worst of all, try to intimidate and discredit the critic.

And so, it was to my pleasant surprise that Michael Munger actually tweeted this blogpost. In so doing, he displayed more intellectual honesty than most economists (in my humble experience).

But unfortunately, in his tweets, Munger adds these two remarks:

But, as the Italians say, "Si non è vero è ben trovato!" [Wiktionary: "Even if it is not true, it is a good story."]

I guess I would dispute AE's claim that I was using this story as evidence. I was using it as a pedagogical tool.

The above two remarks reflect exactly the errors that Coase criticized and which I've discussed above. (I don't know whether Munger simply failed to read my post or read it but simply thought nothing of it. Above I wrote, "Never let the facts get in the way of a sexy and publishable theory." This was simply a small alteration of the familiar English quip, "Never let the facts get in the way of a good story," whose close Italian cousin Munger then simply repeats.)

It's OK to use an apocryphal story for pedagogical purposes—but one must be clear that the story may not be fact. What's not OK is to repeat as fact—over the course of decades—an "incredible" (in Munger's own word) story and use it as evidence for one's preferred theories and worldviews.

There is a difference between (a) illustrating human nature using a fable such as the Emperor's New Clothes; and (b) reporting it as a historical event that actually occurred in medieval Europe. In (a), the audience understands that this is a fable containing a grain of truth but which need not be taken too seriously or literally. In (b), the audience is astonished and seeks more details—where and when in medieval Europe did this occur? What was the historical context? Was the Emperor of sound mind? What happened to this Emperor and his Empire afterwards? Whatever the answers to these questions, the fact that this amazing historical event actually occurred would force many in the audience to seriously reconsider their worldviews, in a way that it would not were it merely a fable.

This Chinese coolie story is powerful precisely because it's incredible. If true, its incredible quality lends incredible support to the teller's preferred theories; moreover, the otherwise-skeptical audience is forced to move that much closer to the teller's position. This is probably why so many story-tellers were happy to report the story as fact for so many decades. Conversely, if Cheung and McManus had been completely clear about the provenance of the story, it is unlikely to have appeared in print even once.

In listening to the EconTalk podcasts, it's striking how credulous the host Russ Roberts is to this particular story and also others that happen to fit his worldviews. At the same time, Roberts is often highly skeptical (and interruptive/rude) about other stories which are much less dubious but which fail to fit his worldviews (see e.g. "Bernstein on inequality", 2008-10-06).

I am reminded of Stigler's (1947) remarks:

Economists possess their full share of the common ability to invent and commit errors ... Perhaps their most common error is to believe other economists. ...

Even the most competent economist will be biased in what he checks: he will accept as true the statements or bits of reasoning that he believes and he will examine with critical care the views that are novel or contradictory to those he has been holding.

Additional point: The public already has little trust in economists. This is not helped by Munger's (and many other economists') flippant and casual attitude towards the facts and readiness to make excuses post hoc (it was just "a good story", "a pedagogical tool"). These flaws are common to all of us human beings, but economists need to hold themselves to higher standards when speaking and writing as economists. Otherwise there is no reason for the public to trust economists any more than your random politician or internet commenter. Indeed, they don't.