The most convincing theory of comparative economic development asserts that it is institutions – the way societies are organized – that are the fundamental cause of countries? development of underdevelopment. To attain prosperity, a country needs to accumulate physical and human capital and create and adopt technology. Whether or not it does so is determined by the incentives that stem from the institutional environment.
American Economic Review, 91, 1369–1401We exploit differences in European mortality rates to estimate the effect of institutions on economic performance. Europeans adopted very different colonization policies in different colonies, with different associated institutions. In places where Europeans faced high mortality rates, they could not settle and were more likely to set up extractive institutions. These institutions persisted to the present. Exploiting differences in European mortality rates as an instrument for current institutions, we estimate large effects of institutions on income per capital. Once the effect of institutions is controlled, for countries in Africa or those closer to the equator do not have lower incomes.
American Economic Review, 90, 126-130Per capita income in many sub–Saharan African countries, such as Chad and Niger, is less than 1/30th of that of the United States. Most economists and social scientists suspect that this is in part due to institutional failures that stop these societies from adopting the best technologies. A particularly interesting historical example comes from the diffusion of railways in the 19th century. While railways are regarded as a key technology driving the Industrial Revolution, there were large lags in their diffusion. For example, in 1850 the United States had 14,518 km of track, Britain 9,797 km, and Germany 5,856 km; in the Russian and Hapsburg empires there were just 501 km and 1,357 km, respectively (all date from Brian R. Mitchell ). Why do societies, as in this example, fail to adopt the best available technologies?
Economic and Monetary Union (EMU) in Europe will have important effects on international monetary affairs. This is true on both economic and policy–making dimensions. As for the first, the euro is a major new currency whose use in international transactions will affect global monetary and financial relations in and of itself. The euro might rival the dollar as the principal international currency, which would fundamentally alter the character of other countries' exchange rate policies. Or the euro might prove a feeble currency, of little import to countries not directly tied to it. In this sense, the euro's international economic role is of interest and importance.
More than fifty–five years ago,in February 1948, the British historian Lewis Namier (1888 –1960) delivered a lecture commemorating the centennial of the European revolution of 1848. His lecture has been published many times since then as "1848: Seed–plot of History," in, among other places,a volume titled Vanished Supremacies. Namier's choice of 1848 as a point of departure was well founded. There is a tired cliché that 1848 was a turning point in history when history failed to turn, but that is wrong. The year 1848 saw the first European revolutions: France was at the center, and there were also revolutions in Palermo, Naples, Vienna, Berlin, Buda, and Poznañ, to name a few. It was also the year of nationalist revolutions in Central Europe and the year of publication of The Communist Manifesto, which predicted that an international proletarian revolution would abolish capitalism, the state, nations, and nationalism. In 1848,as Kathleen Burk writes in her study of A.J.P.Taylor, the Austrian, or Habsburg, Empire "was a German as well as a Balkan Power,the keystone of the Concert of Europe;there was the German nation, but no Germany; there were Italian states, some of which belonged to the Austrian Empire, and two Italian kingdoms, but no Italy; France was still perceived by all the others as the most powerful,or at least the most threatening, of the continental Powers; and Russia was predominantly a European,not an Asiatic, Power ...."
Human security is a concept that dates back to the Enlightenment. Various strains of meaning, spanning a focus on individual rights and a preoccupation with territorial integrity of states, have accompanied its use in many settings. In the last 25 years, the term has increasingly been applied to political, social, and economic inputs required to create security for individuals and communities. Most recently there has been growing interest in assessing the usefulness of this concept in the design of policies to provide relief and stabilization in areas emerging from war and conflict. In that transitional context this paper argues for a new definition of human security based on identifying those factors that protect and promote human well being through time. This argument builds on the capabilities analysis of Sen and Dreze, incorporates the vulnerability model described by Webb, and employs the psychosocial needs framework of Amoo. Noting that the provision of basic material supports is essential but not sufficient, the definition of human security advanced here insists on the additional importance, for individuals and communities, of fulfilling three basic psychosocial dimensions: a sense of home and safety; constructive family and social supports; and acceptance of the past and a positive grasp of the future. These three psychosocial dimensions (referred to in shorthand as home, community, and time) are evaluated in a number of settings, primarily in Africa. Suggestions are provided, based upon this concept, for humanitarian efforts in refugee and immediate post–conflict settings. The paper further argues that ways of measuring human security along these three dimensions are more easily approached through the use of negative indices, or threats to human security. The negative indices proposed here are social dislocation (for home), dynamic inequality (for community relationships), and high discount rate (for positive sense of the future). It is noted that further methodological effort is needed to refine the metrics to be used in these indices. Whether this concept and its proposed indices could prove useful in identifying trends in human security (or threats to human security) in the immediate post (or pre) conflict setting will require further empirical work, through retrospective case studies and prospective observation and analysis.
Global inequities in access to pharmaceutical products exist between rich and poor countries because of market and government failures as well as huge income differences. Multiple policies are required to address this global drug gap for three categories of pharmaceutical products: essential drugs, new drugs, and yet–to–be–developed drugs. Policies should combine "push" approaches of financial subsidies to support targeted drug development, "pull" approaches of finnancial incentives such as market guarantees, and "process" approaches aimed at improved institutional capacity. Constructive solutions are needed that can both protect the incentives for research and development and reduce the inequities of access.
Global health problems require global solutions, and public–private partnerships are increasingly called on to provide these solutions. But although such partnerships may be able to produce the desired outcome, they also bring their own problems. A first–of–its kind workshop in April, hosted by the Harvard School of Public Health and the Global Health Council, examined the organizational and ethical challenges of partnerships, and ways to address them.
Nixon was not the only one who went to China; Ronald McDonald is there now, too. McDonald's triumphed — in a cultural zone where many adults think fried beef patties taste bizarre — by catering to China's pampered only children, the so–called little emperors and empresses. The "Golden Arches" have become part of the landscape of Beijing and Hong Kong. But is McDonald's trampling local culture in the name of a bland, homogeneous world order? Not really. Global capitalism pushes one way, and local consumers push right back. Herewith, a parable of globalization.Published in Foreign Affairs 79, no. 3 (May/June 2000).
Why do some democracies choose economic policies that promote economic growth, while others seem incapable of prospering? Why are some polities able toprovide the public goods that are necessary for economic growth, while others turn the machinery of government toward providing private goods? Why are some countries able to make long term credible policy commitments, while others cannot? In what follows, we present a theory that argues that the diversity of economic policies is rooted in the diversity of democratic institutions in each country. Each polity, according to the divisions and necessities of its society chooses a set of democratic institutions to resolve its basic political problems. These institutions define a sequence of principal–agent relationships (Madison, Dahl 1967), commonly numbering at least three. First, the sovereign people delegate decision–making power (usually via a written constitution) to a national legislature and executive. The primary tools that the people retain in order to ensure appropriate behavior on the part of their representatives are two: the power to replace them at election time; and the power to set the constitutional rules of the political game. A second delegation of power occurs when the details of the internal organization of the legislature and executive are settled. This process entails the creation of ministerial positions, of committees, and of agenda control mechanisms. Here too constitutional regulations of the relationship between the legislature and the executive (is the legislature dissoluble? can cabinet ministers sit in the legislature?) come into play. Third, the legislature and the executive delegate to various bureaus and agencies to execute the laws. In this delegation, administrative procedures and law set the terms of the delegation.
Although majoritarian decision rules are the norm in legislatures, relatively few democracies use simple majority rule at the electoral stage, adopting instead some form of multiparty proportional representation. Moreover, aggregate data suggest that average income tax rates are higher, and distributions of posttax income flatter, in countries with proportional representation than in those with majority rule. While there are other differences between these countries, this paper explores how variations in the political system per se influence equilibrium redistributive tax rates and income distributions. A three–party proportional representation model is developed in which taxes are determined through legislative bargaining among successful electoral parties, and the economic decision for individuals is occupational choice. Political–economic equilibria for this model and for a two–party,winner–take–all, majoritarian system are derived and compared.
From the Journal of Political Economy 108, (December 2000): 1235-1269.Download PDF
The documents concerning the Cuban missile crisis, declassified by the Office of the Historian of the U.S. Department of State, reveal quite effectively a key theme in the conduct of U.S. foreign policy in 1962–63: Cuba's bizarre role within the context of U.S. government decision making. This role had somewhat contradictory dimensions.Cuba seemed to be both an afterthought and an obsession for U.S. decision makers. Its exclusion from the diplomatic negotiations over the missile crisis was an instance of negligence, though it came about in part from a deliberate decision. Such Cuban exclusion reduced the likelihood that the United States could accomplish all of its goals in the missile crisis settlement. Moreover, information included in these documents only to some degree (or not at all) calls attention to Cuba's much greater substantive importance before and during the missile crisis than U.S. officials thought at the time. This documentary record, therefore, reminds us that the outcome of the missile crisis was so positive for the United States, to a significant degree, thanks to Soviet statesmanship in managing and controlling its unhappy Cuban ally.
This landmark theoretical book is about the mechanisms by which special
interest groups affect policy in modern democracies. Defining a special
interest group as any organization that takes action on behalf of an
identifiable group of voters, Gene Grossman and Elhanan Helpman ask:
How do special interest groups derive their power and influence? What
determines the extent to which they are able to affect policy outcomes?
What happens when groups with differing objectives compete for
influence?The authors develop important theoretical tools for studying
the interactions among voters, interest groups, and politicians. They
assume that individuals, groups, and parties act in their own
self-interest and that political outcomes can be identified with the
game-theoretic concept of an equilibrium. Throughout, they progress
from the simple to the more complex. When analyzing campaign giving,
for example, they begin with a model of a single interest group and a
single, incumbent policy maker. They proceed to add additional interest
groups, a legislature with several independent politicians, and
electoral competition between rival political parties. The book is
organized in three parts. Part I focuses on voting and elections. Part
II examines the use of information as a tool for political influence.
Part III deals with campaign contributions, which interest groups may
use either to influence policy makers’ positions and actions or to help
preferred candidates to win election.
Paper presented at the PIEP conference in November 2000. Download PDF
A 500–pound tuna is caught off the coast of New England or Spain, flown thousands of miles to Tokyo, sold for tens of thousands of dollars to Japanese buyers…and shipped to chefs in New York and Hong Kong? That's the manic logic of global sushi.
Both individual experiences and community characteristics influence how much people trust each other. Using individual–level data drawn from US localities we find that the strongest factors associated with low trust are: i) a recent history of traumatic experiences; ii) belonging to a group that historically felt discriminated against, such as minorities (blacks in particular)and, to a lesser extent, women; iii) being economically unsuccessful in terms of income and education; iv) living in a racially mixed community and/or in one with a high degree of income disparity. Religious beliefs and ethnic origins do not significantly affect trust. The role of racial cleavages leading to low trust is confirmed when we explicitly account for individual preferences on inter–racial relationships: within the same community, individuals who express stronger feelings against racial integration trust relatively less the more racially heterogeneous the community is.
This paper studies the relationship between international conflict and the size distribution of countries in a model in which both peaceful bargaining and non–peaceful confrontations are possible. We show how the size distribution of countries depends on the likelihood, benefits and costs of conflict and war. We also study the role of international law and show how better defined international "property rights" may lead to country breakup and more numerous local conflicts.
In a now–familiar scene, General H. Norman Schwarzkopf, imposing in his desert "battle dress uniform," stood before the press and pointed to the TV on his left. On the screen, a set of bombing crosshairs overlaid a roadbed. Transfixed by the cockpit imagery, the reporters chuckled nervously when someone the general called "the luckiest man in Iraq" drove through the crosshairs. With perfect comic timing, he quipped, "And now, in his rear–view mirror?" as a U.S. precision–guided munition (PGM) detonated, obliterating the road where the driver had just been. According to the Gulf War Air Power Survey, "Few scenes were as vivid on television as the picture of a guided bomb going through a ventilation shaft in an Iraqi office building." A central post–war question was whether such images in fact presaged a new style of combat based on advanced technology: Were we watching the birth of a U.S.–led revolution in military affairs (RMA), or simply slicker packaging of business as usual?
On March 23, 1983, President Ronald Reagan shocked the national security establishment by calling upon the nation's scientific community, "who gave us nuclear weapons, to turn their great talents to the cause of mankind and world peace: to give us the means of rendering these weapons impotent and obsolete." Seventeen years have passed since that speech, and the United States has spent more than $60 billion trying to develop a defense against ballistic missiles. The Strategic Defense Initiative (SDI, or "Star Wars") and its successors have cost more than twice as much as the Manhattan Project (in constant dollars), but these programs have yet to produce a single workable weapon. This "achievement" is probably a record in the annals of defense procurement: never has so much been spent for so long with so little to show for it. Explaining how this happened—and why—is the main aim of Frances Fitzgerald's Way Out There in the Blue: Reagan, Star Wars, and the End of the Cold War. The "Star Wars" saga, according to Fitzgerald, is the story of how the United States came to chase a chimera. For Fitzgerald, "Star Wars" illustrates "the extent to which our national discourse about foreign and defense policy is not about reality—or the best intelligence estimates about it—but instead a matter of domestic politics, history, and mythology."
As with any president, it is easy to think up ways that Clinton's record might be improved. But on the whole, he does not deserve the chorus of criticism he has received. Clinton's critics fail to appreciate how changes in the international position of the United States have complicated the making of its foreign policy. The next president will fact similar pressures.