Hierarchies or Markets? The Survival of POWs during WWII Clifford G. Holderness∗ Jeffrey Pontiff* December 2008 Using a database of virtually all American prisoners of war (POWs) during World War II, we examine for the first time how hierarchy affects success. We find that survival declines as the hierarchy of a prisoner’s group more closely matches the military population and as it becomes steeper. Those in the most hierarchical groups were 20% less likely to survive than those in the least hierarchical groups. This holds for alternative groupings of prisoners and for both Germany and Japan, even though prisoners of Japan were far more likely to die. One explanation consistent with survivors’ accounts is that trading among prisoners was beneficial, but the military’s hierarchy impeded markets. JEL Classification: D23 Keywords: Hierarchy, centralization, decentralization, markets ∗ Boston College (
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[email protected]). We thank Justin Martin for research assistance. This paper has benefited from the comments of Bruce Kennedy, Alan Marcus, Harold Mulherin, Matthew Rhodes-Kroph, Edward Rice, Dennis Sheehan, and seminar participants at Boston College, Hanken School of Economics, Harvard Business School, Helsinki School of Economics, SIFR, University of Toronto, and William & Mary. December 2008 Hierarchies or Markets? The Survival of POWs during WWII I. Introduction In a world of scarcity some means must be found to allocate resources. Although economists have traditionally focused on the price mechanism, it is not the only way to allocate resources. Coase’s (1937) seminal insight is that at times production through organizations will be more efficient than production through markets.