Lecture+8+October+12

Lecture+8+October+12 - Todays agenda Exam Nobel Prize...

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Today’s agenda Exam Nobel Prize announcement this morning Democracy and economic conditions How do economic development and the structure of the economy affect the likelihood that a country will become and remain a democracy?
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2009 Nobel Prize in Economics Oliver Williamson Elinor Ostrom Economic governance Markets v. firms
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Markets and firms as alternative governance structures Differ in how they resolve conflicts of interest Drawback of markets: haggling and disagreement In firms, these problems are smaller; can resolve conflicts through use of authority (though authority can be abused). Markets with many similar sellers and buyers: conflicts tolerable since sellers and buyers can exit and trade with others. Greater their mutual dependence , more likely people are to conduct their transactions inside a firm’s boundary . Degree of mutual dependence: largely determined by extent to which assets can be redeployed outside the relationship. A coal mine and a nearby electric generating plant are more likely to be jointly incorporated the greater the distance to other mines and plants.
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Common-property resources Each person’s consumption reduces availability of the resource to others. Fish stocks, oil pools, oceans, atmosphere Prisoners’ dilemma problem Solutions to overexploitation Taxes, quotas, etc. Privatization Leave as common property and let users devise governance rules. Ostrom, in case studies of CPRs, found many successful governance rules and derived a set of design principles for them. Laboratory experiments, too Repeated games
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Three waves of democratization Long first wave from 1820s to 1920s followed by reversed wave from early 1920s to early 1940s Short wave from early 1940s to 1960s Third wave from mid-1970s onwards
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Three waves of democratization R. Doorenspleet, “Reassessing the Three Waves of Democratization,” World Politics 52 (2000): 384-406
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Some policy consequences If economic development causes democracy Our policy toward authoritarian regimes should embrace free trade and perhaps foreign aid to foster economic development, hastening democratization. But if democracy is not a by-product of economic development Democracies should consider requiring the observance of democratic political norms as a condition for free trade and foreign aid .
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Stage theory of development All countries pass through the same historical stages. Contemporary underdeveloped countries are merely at an earlier stage. In the 1950s and 1960s, Latin America, Asia, and Africa were seen as just “primitive” versions of European nations. They would eventually “develop” and come to look like Western Europe and the United States. Not just economically but in terms of political
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Lecture+8+October+12 - Todays agenda Exam Nobel Prize...

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