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111takehomeexam1 - Mitch Fleischman(25005649 Part I 1...

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Mitch Fleischman (25005649) Part I: 1. Transaction costs – Douglas North. This is simply the intangible (or sometimes tangible) internal or external cost associated with an exchange of goods. As North puts it: it’s the associated cost when you must go outside of your own “dense social network”. This thought is perhaps the very foundation for the development of a state (and economy). This is the “economic institutionalization” that North describes and how the state enforces contracts, shapes property rights and has an established legal framework. 2. Enclosure movement – Karl Polanyi. This is what Polanyi describes as the proverbial kickoff to industrialization. It was basically a period (after Feudalism faded) where land was divided up and became a commodity and established this relatively new concept of property rights. In addition to the land becoming a commodity, there became the possibility of using the land to make a commodity – it so-called “promot[ed] market activity”. 3. Monopoly of the legitimate use of physical force – Max Weber. This is how we define the state. It has more power than any other government or human community contained within it (the monopoly). All people within this community agree the state as a legitimate authority and subject themselves to the laws of the state. Without the monopoly use of physical force, there would be “multiple and overlapping authority and no systemic organization” – feudalism. 4. Print capitalism – Benedict Anderson. Print capitalism is the free exchange of writings and works of authors. It greatly increased the spread of ideas mainly because of the fact that printing books became much cheaper (printing press), and more regional dialects were being used to write books. People need not be educated in Latin anymore to understand text, instead they could learn just of their language. This of course is the building blocks of the modern world, the market, the spread of (new) ideas. 5. Imitation and innovation – Alexander Gerschenkron. To keep up with the rest of the developing world, it was necessary for some countries to imitate the successes that other countries had. Like France and England, Germany successfully recognized that banking was necessary for industrialization. Without the development of private capitol, however, this would be extremely slow – so what did Germany do? They made a state-run bank, rather than deal with the private sector. This allowed a much more comprehensive monetary system that allowed people to securely borrow money and invest it in industry. Simply put, imitation and innovation is the quint-essential trait of the strategies of middle developers.
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