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on Business, Economic and Financial History |
|
Issue of 2014‒06‒22
twenty-two papers chosen by |
| By: | Sofia Teives Henriques (University of Southern Denmark); Paul Sharp (University of Southern Denmark) |
| Abstract: | Is a lack of domestic energy resources necessarily a limiting factor to growth, as suggested for example by the work of Robert C. Allen? We examine the case of Denmark - a country which historically had next to no domestic energy resources - for which we present new historical energy accounts for the years 1800-1913. Focusing on the period of the first Industrial Revolution, we demonstrate that Denmark’s take off at the end of the nineteenth century was in fact relatively energy dependent. We relate this to her well-known agricultural transformation and development through the dairy industry. The Danish cooperative creameries, which spread throughout the country over the last two decades of the nineteenth century, were dependent on coal – a point which has not been stressed before in the literature. Denmark had next to no domestic coal deposits, but we demonstrate that her geography allowed cheap availability throughout the country through imports. Thus, Denmark might be seen as the exception that proves the rule: although modern energy forms are important for growth, domestic energy resources are not necessary, as long as it is possible to import them cheaply from elsewhere. |
| Keywords: | Coal, dairying, Denmark, energy transition |
| JEL: | N5 Q4 |
| Date: | 2014–06 |
| URL: | http://d.repec.org/n?u=RePEc:hes:wpaper:0056&r=his |
| By: | John D. Conroy (Crawford School of Public Policy, The Australian National University) |
| Abstract: | This paper is concerned with the accommodation to the market economy of Tolai people, indigenous to the Gazelle Peninsula in Papua New Guinea and regarded as one of the most prosperous and enterprising groups in the country. 'The market' was introduced to Tolai by German (and later, Australian) colonists from the late nineteenth century. Without pretension to novelty in the historical narrative it asserts the value of viewing these events through the lens of 'informal economy', as constructed by Keith Hart. The paper is a companion piece to another study, concerned with the economic history of Chinese immigrants to Rabaul (Conroy, forthcoming). Starting from the proposition that (unlike the Chinese) the Tolai had no tradition of 'trade as a self-sufficient profession', it considers how they adapted their livelihoods to the colonial economy. In German New Guinea, market economic activity was supposed to be conducted in conformity with the norms of a particular model of Weberian 'rational-legal' bureaucracy, introduced by the Reich. In turn, German bureaucratic norms were guided by an ideology of 'national-economic purpose', enunciated for the Wilhelmine state and its colonies. The paper argues that subsequent Australian administrators adopted the German bureaucratic framework, while employing it initially for somewhat different ends and eventually (after World War II) adapting it to the needs of a new ideology of 'economic development'. Across this long period Tolai engagement in the market economy proved to be 'informal', in the sense that it did not conform fully with prescribed bureaucratic norms. It displayed the hybridity found wherever Smithian trade (seen as activated by a natural human tendency to 'truck and barter') is confronted by Maussian exchange (seen as the product of socially regulated customs). The paper considers how tensions between German/Australian expectations of Tolai economic behaviour and the reality of that behaviour played out over the colonial period to 1975. At the end of that time, trade as 'a self-sufficient profession' appeared to be confined to some instances of petty specialized trade amid signs of more general emerging change in trading culture. |
| JEL: | E26 N37 N57 N97 O17 P52 Z13 |
| Date: | 2014–05 |
| URL: | http://d.repec.org/n?u=RePEc:een:crwfrp:1405&r=his |
| By: | Alan Fernihough (Institute for International Integration Studies, Trinity College Dublin); Kevin Hjortshøj O'Rourke (All Souls College, Oxford) |
| Abstract: | We examine the importance of geographical proximity to coal as a factor underpinning comparative European economic development during the Industrial Revolution. Our analysis exploits geographical variation in city and coalfield locations, alongside temporal variation in the availability of coal-powered technologies, to quantify the effect of coal availability on historic city population sizes. Since we suspect that our coal measure could be endogenous, we use a geologically derived measure as an instrumental variable: proximity to rock strata from the Carboniferous era. Consistent with traditional historical accounts of the Industrial Revolution, we find that coal exhibits a strong influence on city population size from 1800 onward. Counterfactual estimates of city population sizes indicate that our estimated coal effect explains at least 60% of the growth in European city populations from 1750 to 1900. This result is robust to a number of alternative modelling assumptions regarding missing historical population data, spatially lagged effects, and the exclusion of the United Kingdom from the estimation sample. |
| Keywords: | Height, Stature Coal, Historical Population, Geography |
| JEL: | N13 N53 O13 O14 J10 |
| Date: | 2014–01 |
| URL: | http://d.repec.org/n?u=RePEc:iis:dispap:iiisdp439&r=his |
| By: | Mara P. Squicciarini; Nico Voigtländer |
| Abstract: | While human capital is a strong predictor of economic development today, its importance for the Industrial Revolution is typically assessed as minor. To resolve this puzzling contrast, we differentiate average human capital (worker skills) from upper tail knowledge both theoretically and empirically. We build a simple spatial model, where worker skills raise the local productivity in a given technology, while scientific knowledge enables local entrepreneurs to keep up with a rapidly advancing technological frontier. The model predicts that the local presence of knowledge elites is unimportant in the pre-industrial era, but drives growth thereafter; worker skills, in contrast, are not crucial for growth. To measure the historical presence of knowledge elites, we use city-level subscriptions to the famous Encyclopédie in mid-18th century France. We show that subscriber density is a strong predictor of city growth after 1750, but not before the onset of French industrialization. Alternative measures of development confirm this pattern: soldier height and industrial activity are strongly associated with subscriber density after, but not before, 1750. Literacy, on the other hand, does not predict growth. Finally, by joining data on British patents with a large French firm survey from 1837, we provide evidence for the mechanism: upper tail knowledge raised the productivity in innovative industrial technology. |
| JEL: | J24 N13 O14 O41 |
| Date: | 2014–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:20219&r=his |
| By: | Eltjo Buringh |
| Abstract: | The overall price trend of late-medieval hand-written books was downwards, despite rising demand by a more literate population, causing upward pressure on prices. Gradually, higher writing speeds reduced late-medieval book prices. A lower price of information facilitated schooling and an increase in human capital. The plague’s demographic shock (1348-1351) reduced used book prices to one half or two-thirds of their pre-plague levels, while production costs of new books then rose. Cheaper access to information (used books) in combination with other post-plague trend breaks gave human capital in the Latin West a boost, and laid a foundation for modern economic growth. |
| Keywords: | : hand-written books, human capital, economic growth, black death, books |
| Date: | 2014–06 |
| URL: | http://d.repec.org/n?u=RePEc:ucg:wpaper:0055&r=his |
| By: | Gerlach, Stefan. (Central Bank of Ireland); Stuart, Rebecca (Central Bank of Ireland) |
| Abstract: | Using annual data from several sources, we study the evolution of M1, M2, income, prices and long and short interest rates in Ireland over the period 1933-2012. We find cointegration and that prices, income and interest rates are weakly exogenous. While the estimates for M2 are stable and close to our priors, for M1 we obtain very low price elasticities, and a relatively high income elasticity, and detect parameter instability. We estimate a short-run M2 demand function that passes a number of diagnostic tests, although the standard errors of the regressions is large. |
| Keywords: | Ireland, historical statistics, long time series, money, income, prices. |
| JEL: | E3 E4 N14 |
| Date: | 2014–03 |
| URL: | http://d.repec.org/n?u=RePEc:cbi:wpaper:08/rt/14&r=his |
| By: | Bottomley, Sean |
| Abstract: | There are two competing accounts for explaining Britain's technological transformation during the Industrial Revolution. One sees it as the inevitable outcome of a largely exogenous increase in the supply of new ideas and ways of thinking. The other sees it as a demand side response to economic incentives – that in Britain, it paid to invent the technology of the Industrial Revolution. However, this second interpretation relies on the assumption that inventors were sufficiently responsive to new commercial opportunities. This paper tests this assumption, using a new dataset of Scottish and Irish patents. It finds that the propensity of inventors to extend patent protection into Scotland and/or Ireland was indeed closely correlated with the relative market opportunity of the patented invention. |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:tse:iastwp:28168&r=his |
| By: | Jaremski, Matthew (Department of Economics, Colgate University) |
| Abstract: | Clearinghouses were private organizations that not only had the power to audit member banks’ balance sheets and levy fines, but also provided emergency liquidity during large-scale financial panics. This paper studies how clearinghouses affected bank composition and solvency during stable periods as well as panics. An annual database of all national bank balance sheets from 1865 to 1914 indicates that national banks grew larger after the creation of a clearinghouse. Relative to the rise in assets, banks reduced their cash reserves and individual deposits and increased their loans, circulation, and interbank deposits. The analysis also shows that while clearinghouse members were less likely to fail during panics, they were more likely to fail in other periods, particularly those in non-financial centers. In this way, clearinghouses seem to have freed up additional resources during stable periods and delayed bank failures until the potential for contagion was removed. |
| Keywords: | Bank Regulation, Financial Panics, Clearinghouses, Bank Failure, National Banking Era |
| JEL: | G21 G32 N21 |
| Date: | 2014–04–01 |
| URL: | http://d.repec.org/n?u=RePEc:cgt:wpaper:2014-06&r=his |
| By: | Rossi, Guido; Spagano, Salvatore |
| Abstract: | The present paper combines legal history with economic theory so to explain the passage from custom to law. Economists have usually explained the shift from customary to statutory law (that is, from spontaneous to formal rules) either in terms contractualism or evolutionism. In the first case, law is the only efficient solution for a Hobbesian-like immanent social conflict. In the second case, customs do create an efficient enough equilibrium. Law comes on a later stage just to formalise an already accepted rule, vesting the custom with a formal status. Neither theory, however, is fully able to explain the transition from custom to law. One struggles with the very acceptance of customs in the first place. The other fails to provide a satisfactorily explanation of the passage from custom to law. The present work seeks to reconcile the two theories by looking at the economic advantages of statutory law over custom. Unlike the first theory, it does not deny that customs may produce a relatively efficient status, but it seeks to explain why, at a certain point, customs were considered as inadequate and statutory law became more desirable. Our answer lies in the publication of written rules, for the presumption of knowledge it entails. Presumption of knowledge of the applicable rules is one of the elements that (oral) customs could not provide to contracts. Although somewhat neglected in many studies on customs and legislation, publication is a crucial element for our understanding of the passage from spontaneous custom to positive law. The work shall first introduce the passage from customary to statutory law in both legal and economic theories. Then, it will analyse the deep symmetry between the number of agents involved and the number of transactions on the one hand and the progressive replacement of customs with statutes on the other. The conclusions of such an analysis will be used to prove the crucial role played by the presumption of knowledge, which is perhaps the missing link between different economic theories on customs and law. |
| Keywords: | Evolutionary Economics, Constitutional Law |
| JEL: | B25 H10 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:56643&r=his |
| By: | Gerlach, Stefan. (Central Bank of Ireland); Stuart, Rebecca (Central Bank of Ireland) |
| Abstract: | In this paper we assemble an annual data set on broad and narrow money, prices, real economic activity and interest rates in Ireland from a variety of sources for the period 1933-2012. We discuss in detail how the data set is constructed and what assumptions we have made in doing so. Furthermore, we perform a VAR analysis to provide some simple empirical evidence on the behaviour of these time series. The results suggest that aggregate supply and inflation shocks play a dominant role in Irish business cycles. |
| Keywords: | Ireland, historical statistics, long time series, business cycles, VAR. |
| JEL: | E3 E4 N14 |
| Date: | 2014–03 |
| URL: | http://d.repec.org/n?u=RePEc:cbi:wpaper:07/rt/14&r=his |
| By: | Alan Gelb, Christian Meyer, and Vijaya Ramachandran |
| Abstract: | We consider economic development of Sub-Saharan Africa from the perspective of slow convergence of productivity, both across sectors and across firms within sectors. Why have “productivity enclaves”, islands of high productivity in a sea of smaller low-productivity firms, not diffused more rapidly? We summarize and analyze three sets of factors: First, the poor business climate, which constrains the allocation of production factors between sectors and firms. Second, the complex political economy of business-government relations in Africa’s small economies. Third, the distribution of firm capabilities. The roots of these factors lie in Africa’s geography and its distinctive history, including the legacy of its colonial period on state formation and market structure. |
| Keywords: | Productivity, Manufacturing, Dualism, Firms, Africa |
| JEL: | D24 L25 O11 O14 |
| Date: | 2014–02 |
| URL: | http://d.repec.org/n?u=RePEc:cgd:wpaper:357&r=his |
| By: | Carlson, Mark A. (Federal Reserve Bank of St. Louis); Wheelock, David C. (Federal Reserve Bank of St. Louis) |
| Abstract: | The 1950s are often pointed to as a decade in which the Federal Reserve operated a particularly successful monetary policy. The present paper examines the evolution of Federal Reserve monetary policy from the mid-1930s through the 1950s in an effort to understand better the apparent success of policy in the 1950s. Whereas others have debated whether the Fed had a sophisticated understanding of how to implement policy, our focus is on how the constraints on the Fed changed over time. Roosevelt Administration gold policies and New Deal legislation limited the Fed’s ability to conduct an independent monetary policy. The Fed was forced to cooperate with the Treasury in the 1930s, and fully ceded monetary policy to Treasury financing requirements during World War II. Nonetheless, the Fed retained a policy tool in the form of reserve requirements, and from the mid-1930s to 1951, changes in required reserve ratios were the primary means by which the Fed responded to expected inflation. The inability of the Fed to maintain a credible commitment to low interest rates in the face of increased government spending and rising inflation led to the Fed-Treasury Accord of March 1951. Following the Accord, the external pressures on the Fed diminished significantly, which enabled the Fed to focus primarily on macroeconomic objectives. We conclude that a successful outcome requires not only a good understanding of how to conduct policy, but also a conducive environment in which to operate. |
| Keywords: | Federal Reserve; monetary policy; reserve requirements; Fed-Treasury Accord; inflation |
| JEL: | E52 E58 N12 |
| Date: | 2014–06–01 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedlwp:2014-013&r=his |
| By: | de Boyer des Roches, Jérôme |
| Abstract: | Over the past two centuries, the connection David Ricardo made between money and foreign trade was widely commented on the basis of the 1809-1811 writings, notably the High Price of Bullion, Proof of the Depreciation of Bank Notes, of the 1816 Proposals for an Economical and Secure Currency, proposals taken again in the chapter twenty seven “On Currency and Banks” of the 1817 Principles of Political economy an Taxation, and of the 1823 Plan for a National Bank. On the other hand, the chapter seven “On Foreign Trade” of the 1817 Principles was mostly ignored with the exception of J.W. Angell (1926), F.W. Taussig (1927), K. Kojima (1951), M. Blaug (1976), J. de Boyer (1992) et G. Faccarello (2013) who did pay attention to it. Yet, according to Ricardo, the concept of comparative advantage cannot be understood without studying the international distribution of precious metals, and the determination of the natural prices of wine and cloth. In other words, the determination of relative prices includes monetary mechanisms. However the chapter seven of the Principles did not simply resume the 1809-1811 Ricardo’s monetary ideas. Here, Ricardo used arguments he had criticized seven years before. Furthermore, he reconsidered the link between value of money and exchange rate. The aim of this paper is to present and compare Ricardo’s monetary and foreign exchange analysis in the writings of 1809-1811 on one side, and in the chapter seven of his 1817 book on the other side. By means of a numerical example, the second section recalls the main features of the 1809-1811 analysis. According to Ricardo, the value of money in two trading countries must be equal for the foreign exchange equilibrium to be reached. Several notions such as the price specie flow mechanism, the quantity theory and the criticism of Thornton’s gold point mechanism are emphasized in this section. The third section presents the theory of the comparative advantage developed in chapter seven of the Principles; more than half of this text is consecrated to monetary components. Emphasis is placed on the foreign exchange market, the price specie flow between countries, and also the dynamics of money prices and wages that led to international specialization. The fourth section studies first the disconnection established by Ricardo in chapter seven of the Principles between the values of currencies and exchange rates, and second then his comments relative to the bullionist controversy; these comments close the chapter. The fifth section provides some precisions on (1) the "magic numbers" – i.e. 80, 90, 120, 100 -, (2) on the assumptions made to obtain the money prices - i.e. £45, £50, £50, £45 -, so that the terms of trade/exchange are not indeterminate contrary to an opinion inherited from John Stuart Mill, (3) finally on the consequences of an “improvement in making” English wine. Our research provides the following conclusions. First, Ricardo’s statement of the comparative advantage theory involves the monetary theory, specifically it presupposes the validity of the quantity theory. The specie inflow (outflow) in one country drops (increases) the value of money in this country. Secondly, according to the comparative advantage theory, “England would give the produce of the labour of 100 (English) men, for the produce of the labour of 80 (Portuguese)” (Ricardo, 1817, p; 135). It entails that the money price of the produce of 80 Portuguese men is equal to the money price of the produce of 100 English. It means that the money price of the produce of a given quantity of labour is 25% higher in Portugal than in England; i.e. that the value of a given quantity of money is 20% lower in Portugal than in England. Third, the specie flow between countries is not described with Hume’s price specie flow mechanism, but with Thornton’s gold points mechanism. Fourth, fixed exchange rate under gold standard does not involve gold has the same value in various countries. The symmetrical changes, in two countries, in the quantities of money, that lead to symmetrical changes in the values of money, do not modify the market prices of gold in any of these countries. To conclude, the seventh chapter of the Principles does not support Ricardo’s monetary view at the time of the Bullion Committee. |
| Keywords: | Comparative advantage; Foreign Trade; Money; Specie flow mechanism; Gold points; Ricardo; |
| JEL: | B12 E4 F1 |
| Date: | 2014–05 |
| URL: | http://d.repec.org/n?u=RePEc:dau:papers:123456789/13535&r=his |
| By: | Pablo Fajgelbaum; Stephen J. Redding |
| Abstract: | This paper uses the natural experiment of Argentina's integration into world markets in the late-nineteenth century to provide evidence on the role of internal geography in shaping the effects of external integration. We develop a quantitative model of the distribution of economic activity across regions and sectors. The model predicts a spatial Balassa-Samuelson effect, in which locations with better access to world markets have higher population densities, higher shares of employment in the non-traded sector, higher relative prices of non-traded goods, and higher land prices relative to wages. We use the model and data on population density and sectoral employment shares to recover sufficient statistics that isolate the economic mechanisms through which external and internal integration affect economic development. Our analysis highlights the role of complementary investments in internal infrastructure and technology adoption in mediating the economy's response to external integration. |
| JEL: | F11 F14 O13 O14 |
| Date: | 2014–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:20217&r=his |
| By: | Bouchikhi, Hamid (ESSEC Business School); Kimberly, John R. (The Wharton School, University of Pennsylvania) |
| Abstract: | As of July 1, 2010, the College of Humanities and Social Sciences at the University of the Holy Spirit (UHS) has a single Department of Economics. However, in the seven prior years, there were two economics departments, one that was resolutely mainstream and the other that was just as resolutely heterodox. What accounts for this unusual organizational arrangement? We show that this arrangement was part of a protracted conflict about the kind of economics that befits the Catholic identity of UHS that resulted, ultimately, in a full embrace of mainstream economics in July 2010. We draw on and amend Oliver's (1991) typology of organizational responses to institutional processes and investigate why and how UHS went from deliberate avoidance to full acquiescence to mainstream economics. Our analysis suggests that while organizations may be compelled to adapt to dominant norms, as institutional theorists contend, the process of adaptation involves a variety of conflicting moves and counter moves that engage identity and power and that require forceful leadership to resolve. |
| Keywords: | Institutional Isomorphism; Micro-processes; Organizational Adaptation |
| JEL: | I20 |
| Date: | 2014–05 |
| URL: | http://d.repec.org/n?u=RePEc:ebg:essewp:dr-14009&r=his |
| By: | Waldenström, Daniel (Department of Economics, Uppsala University) |
| Abstract: | This chapter presents historical evidence about Swedish stock prices, dividends, and yields on government fixed-interest securities. Monthly returns are presented since 1901 for stocks, since 1874 for government long-term bonds and since 1856 for short-term Treasury bills or central bank discount rates. Annual stock price and returns indices from 1870 are also presented. Altogether, these series comprise the longest financial asset price database for Sweden to date. An important ambition is to provide information about the quality of the financial data, how they are constructed and how they are modified so as to ensure consistency across time. The chapter also outlines the basic institutional and economic framework of the Swedish stock and money markets. Research has shown that asset prices are influenced by the extent of trading activity as well as by the legal setting and microstructural characteristics. Finally, the chapter offers some initial analysis of the new evidence: calculation of returns for different periods, examination of trends and trend breaks in returns, dividends, volatility and cross-country returns correlations, and computation of equity risk premia across holding periods and historical eras. |
| Keywords: | Historical stock returns; Historical bond yields; Stockholm Stock Exchange; Equity risk premium |
| JEL: | G12 N23 N24 |
| Date: | 2014–06–10 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:iuiwop:1027&r=his |
| By: | Qiang Chen (School of Economics, Shandong University); ; |
| Abstract: | The size of nations matters, but the literature on the subject is long on theory and short on direct econometric testing. Using a unique time series data set spanning the past two millennia, we study the process of unification and division in historical China. The empirical results are consistent with the theory on the size and number of nations. First, frequent famines reduced the number of nations in China because a larger nation could more efficiently ensure the provision of public goods as the cost of such public goods (e.g., disaster relief) rose. Second,increased ethnic diversity was associated with an increased number of nations because smaller nations could better serve a heterogeneous population. Using both annual and decadal data, these results survive a variety of robustness checks after controlling for nomadic attacks and a rich set of climate variables. |
| JEL: | O11 N45 |
| Date: | 2014–06 |
| URL: | http://d.repec.org/n?u=RePEc:shn:wpaper:2014-01&r=his |
| By: | Kris James Mitchener; Kirsten Wandschneider |
| Abstract: | We examine the first widespread use of capital controls in response to a global or regional financial crisis. In particular, we analyze whether capital controls mitigated capital flight in the 1930s and assess their causal effects on macroeconomic recovery from the Great Depression. We find evidence that they stemmed gold outflows in the year following their imposition; however, time-shifted, difference-in- differences (DD) estimates of industrial production, prices, and exports suggest that exchange controls did not accelerate macroeconomic recovery relative to countries that went off gold and floated. Countries imposing capital controls also appear to perform similar to the gold bloc countries once the latter group of countries finally abandoned gold. Time series analysis suggests that countries imposing capital controls refrained from fully utilizing their newly acquired monetary policy autonomy. |
| JEL: | E61 F32 F33 F41 G15 N1 N2 |
| Date: | 2014–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:20220&r=his |
| By: | Jagjit S. Chadha; Morris Perlman |
| Abstract: | We examine the relationship between prices and interest rates for seven advanced economies in the period up to 1913, emphasizing the UK. There is a significant long-run positive relationship between prices and interest rates for the core commodity standard countries. Keynes (1930) labelled this positive relationship the 'Gibson Paradox'. A number of theories have been put forward as possible explanations of the Paradox but they do not fit the long-run pattern of the relationship. We find that a formal model in the spirit of Wicksell (1907) and Keynes (1930) offers an explanation for the paradox: where the need to stabilise the banking sector's reserve ratio, in the presence of an uncertain 'natural' rate, can lead to persistent deviations of the market rate of interest from its 'natural' level and consequently long run swings in the price level. |
| Keywords: | disability; Gibson's Paradox; Keynes-Wicksell; Prices; Interest Rates |
| JEL: | B22 E12 E31 E42 |
| Date: | 2014–04 |
| URL: | http://d.repec.org/n?u=RePEc:ukc:ukcedp:1403&r=his |
| By: | Erik S. Reinert; Kenneth Carpenter |
| Abstract: | Paper to be presented at the international workshop “Mercantilism and Cameralism – New Approaches and Reconfigurations”, University of Leipzig, July 4-6, 2014. |
| Date: | 2014–06 |
| URL: | http://d.repec.org/n?u=RePEc:tth:wpaper:58&r=his |
| By: | Reckendrees, Alfred |
| Abstract: | The Weimar Republic is analysed within the framework of limited and open access orders. Germany had developed into a mature limited access order before World War I, with rule of law and open economic access but only limited access to politics. After the war, Germany developed toward an open access order; this process was, however, not sustainable. Two interpretations are discussed, which both pose a challenge to the limited access-open access framework: (1.) Weimar Germany was the first open access order that failed; (2.) sufficiency conditions of the sustainability of open access are not yet included in the framework. It is proposed that sustainable open access orders do not only depend on open political and economic access and on the state monopolising violence capacities (coercive power); government and the political institutions must also have the capacity to efficiently create legitimacy via coordination capabilities. -- |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:aluord:1405&r=his |
| By: | Matthew O. Jackson (Department of Economics, Stanford University, Santa Fe Institute and CIFAR); Stephen Nei (Department of Economics, Stanford University) |
| Abstract: | We investigate the role of networks of military alliances in preventing or encouraging wars between groups of countries. A country is vulnerable to attack if there is some fully-allied group of countries that can defeat that country and its (remaining) allies based on a function of their collective military strengths. Even with such a demanding notion of vulnerability, we show that there do not exist any networks that are stable against the addition and deletion of alliances. We then show that economic benefits from international trade can provide incentives to form alliances in ways that restore stability and prevent wars. In closing, we briefly examine the historical data on interstate wars and trade, noting that a dramatic (more than ten-fold) drop in the rate of interstate wars since 1960 is paralleled by an unprecedented growth in trade over the same period. |
| Keywords: | Alliances, Conflict, War, Networks, International Trade, Treaties |
| JEL: | D74 D85 F10 |
| Date: | 2014–04 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2014.46&r=his |