New Comparative Economics

New Comparative Economics - Comparative Economic Systems...

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Comparative Economic Systems Djankov et al.'s: "The New Comparative Economics" Grand Valley State University Dr. Daniel Giedeman
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Basic Idea Traditional comparative economics dealt mostly with the comparison of socialism and capitalism. Now, the key comparisons are between alternative capitalist models that prevail in different countries. Particularly, new comparative economics analyses the institutional differences across countries: how political leaders are chosen property rights wealth redistribution resolution of disputes how firms are governed credit allocation etc.
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Motivation Questions arising from transition: How much government ownership is desirable? How much should governments regulate? How much should the government fight disorder at all? Is democracy the best political system for economic reform or is dictatorship efficient when radical change is required? Within democracies, do reforms proceed better under divided or consolidated governments? Is a federal structure desirable from the viewpoint of economic transformation?
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Motivation “What can one make of these questions? First, the standard economic questions of market failure, and inefficiencies associated with it, have played virtually no role in the central debates of transition. Rather, the central issues have all dealt with property rights: how these rights can best be secured against both public and private expropriation? Second, we see in all these questions a common tradeoff. On the one hand, there is the objective of controlling disorder, that pushes toward greater state intervention. On the other hand, there is the goal of controlling dictatorship, that pushes against state power. In the rest of the paper, we explore this tradeoff.”
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The four common strategies of such control: private orderings private litigation regulation state ownership can be thought of as points on the institutional possibility frontier, ranked in terms of increasing powers of the state. These strategies are associated with progressively diminishing social costs of disorder, and progressively rising social costs of dictatorship.”
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The two central dangers that any society faces are disorder and dictatorship. Disorder: the risk to individuals and their property of private expropriation in the form of murder, theft, violation of agreements, torts, monopoly pricing, etc. Disorder is also reflected in private subversion of public institutions,
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This note was uploaded on 04/05/2011 for the course ECO 365 taught by Professor Giederman during the Winter '11 term at Grand Valley State.

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New Comparative Economics - Comparative Economic Systems...

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