An interesting new book by Tim Besley and Torsten Persson starts with the important observation that: “Almost all economic analyses presume the existence of an effective state.” They point out, though, that this happy situation has prevailed in only a small number of countries for a short period. How does an effective state come about in the first place? That’s the question posed in [amazon_link id=”0691152683″ target=”_blank” ]Pillars of Prosperity[/amazon_link], and it’s at the heart of understanding economic development because it is a precondition for economic growth and escaping poverty. However, it is a question that hasn’t been widely studied by economists in the past, although historians have always regarded it as a key question.
The authors break down this over-arching question into three subsidiary ones: what forces shape state-building capacity and why do they vary from place to place? what factors drive political violence? and what explains the clustering of state institutions, violence, and income? The answer is threefold, too: an absence of internal political violence and repression; simple, readily enforceable and broad-based taxes; and a justice system that enforces contracts and limits public or private exploitation.
The book is moderately technical, aimed at the professional audience. It sets out a model of institution-building in a polity with two groups of people that generates states of different characters – a weak state with a high degree of political instability, a redistributive state transferring resources from one group to another which is nevertheless sufficiently politically stable to have effective fiscal capacities, and a ‘common interest’ state which is strong and effective because it acts as the name suggests. The development of the theoretical model is the heart of the book. The authors do describe empirical regularities in cross-country data suggestive of the usefulness of their model, but wisely do not attempt to disentangle causal relationships – after all, the actual path of history is over-determined. However, the regressions do perform reasonably well in predicting a ‘prosperity’ index, capturing peace, state capacity and income levels, in terms of a handful of variables such as ethnic homogeneity, legal origin (English, Scandinavian, German or Socialist), external conflict and constraints on executive action). As the authors conclude, there is a large new research agenda for economics when it comes to understanding the process of building states.
This must be correct. I can only think of a few other economics books on this general terrain. One is [amazon_link id=”0199267669″ target=”_blank” ]Fighting Poverty in the US and Europe: A World of Difference[/amazon_link] by Alberto Alesina and Ed Glaeser, which looks at the social cohesiveness of the US versus European countries. Another is James Scott’s terrific [amazon_link id=”0300078153″ target=”_blank” ]Seeing Like A State [/amazon_link](which is political science anyway, and focuses later in the state-building process). Also relevant for understanding how social and political cohesiveness develop – or not – must be Scott Page’s [amazon_link id=”0691138540″ target=”_blank” ]The Difference[/amazon_link], which sets out the value of diversity for problem solving within the context of shared goals. This is a fascinating set of questions, and [amazon_link id=”0691152683″ target=”_blank” ]Pillars of Prosperity [/amazon_link]will be essential reading for other researchers in this area.
[amazon_image id=”0691152683″ link=”true” target=”_blank” size=”medium” ]Pillars of Prosperity: The Political Economics of Development Clusters (The Yrjo Jahnsson Lectures)[/amazon_image]
