LAUSR

How can transaction costs prevent effective monitoring of members in an organization? In this paper I test for a relationship between the cost of monitoring and free riding behavior within a religious organization by using a historical case study: the Cistercian Order in Ancien Regime France. The advantage of using the Cistercian Order comes from the two monitoring devices used to discourage market-orientated behavior: (1) an annual visit by the head of a ’supervising’ monastery and, (2) attendance at an annual General Chapter meeting at Citeaux. Since the transaction costs for both monitoring devices are likely correlated with transportation costs, I use newly digitized maps of transportation networks in eighteenth century France and the locations of Cistercian monasteries to derive monitoring costs for each trip. I then use a new data set of agricultural properties confiscated at the beginning of the French Revolution and sold at auction to create a proxy for free riding behavior by the monks – the value of agricultural investment. After matching each property with its owner’s costs, I find that where monitoring costs are higher, monasteries engage in more free riding behavior. The results hold after controlling for characteristics of the monasteries, potential issues of sample selection and bias from major houses.