nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2015‒02‒05
twenty-six papers chosen by
Erik Thomson
University of Manitoba

  1. A Certain Amount of ‘Recantation'. On the Origins of Frank H. Knight’s Antipositivism By Luca Fiorito
  2. Economic growth evens-out happiness: evidence from six surveys By Andrew E. Clark; Sarah Flèche; Claudia Senik
  3. The Rhetorical Structure of Adam Smith’s Wealth of Nations (and the importance of acknowledging it) By Andreas Ortmann; Benoit Walraevens
  4. Bayesian networks and boundedly rational expectations By Ran Spiegler
  5. Climate change and sustainable welfare: an argument for the centrality of human needs By Ian Gough
  6. Essentials of Constructive Heterodoxy: Say’s Law By Kakarot-Handtke, Egmont
  7. Economics in social care – an introductory presentation on aspects of the economic work for the NCCSC team By Annette Bauer; Jennifer Francis
  8. Fighting the Last War: Economists on the Lender of Last Resort By Grossman, Richard; Rockoff, Hugh T
  9. The Economic Problem: Can Islam Play an Effective Role in Solving it Efficiently as well as Equitably? By Chapra, M. Umer
  10. Cascading to Equilibrium: Hydraulic Computation of Equilibria in Resource Selection Games By Yannai A. Gonczarowski; Moshe Tennenholtz
  11. Complexidade: Uma Revisão dos Clássicos By Bernardo Alves Furtado; Patrícia Alessandra Morita Sakowski
  12. Does altruism justify privileges? By Enrico Colombatto; Valerio Tavormina
  13. How to gamble against all odds By Ron Peretz; Gilad Bavly
  14. On the logical structure of de Finetti's notion of event By Tommaso Flaminio; Lluis Godo; Hykel Hosni
  15. On the Use of Price-cost Tests in Loyalty Discounts: Which Implications from Economic Theory? By Chiara Fumagalli; Massimo Motta
  16. Celebrity capital: redefining celebrity using field theory By Olivier Driessens
  17. Pareto Efficiency and Identity By Christopher Phelan; Aldo Rustichini
  18. Endogenous Reputation Formation: Cooperation and Identity under the Shadow of the Future By Kamei, Kenju
  19. Voluntary Activities and Daily Happiness in the US By Gimenez-Nadal, J. Ignacio; Molina, José Alberto
  20. Comment on Homo Moralis: when assortativity evolves By Newton, Jonathan
  21. Banks and human rights: the Thun Group and the UN guiding principles on business and human rights By Damiano de Felice
  22. Ghosts and Forecasts By Bullard, James B.
  23. Does Finance Benefit Society? By Zingales, Luigi
  24. Economic Freedom and Economic Crisis By Bjørnskov, Christian
  25. The art of brevity By Ricardo Alonso; Heikki Rantakari
  26. The Indigenous Roots of Representative Democracy By Jeanet Bentzen; Jacob Gerner Hariri; James A. Robinson

  1. By: Luca Fiorito
    Abstract: The aim of this paper is to investigate in some detail the origins of Knight’s antipositism and to assess the main influences that brought him to a change in methodological perspective after 1921. As importantly, what follows is also an attempt to increase our general understanding of the methodological debates taking place during the early decades of the last century and to shed new light on the inherently pluralistic character of US interwar economics. This paper is organized as follows: the first section outlines Knight’s methodological views as presented in his early works; the second section discusses Knight’s “recantation” and his attack on behavioristic social science; the third section analyze Knight’s discussion of the nature and limitations of scientific economics; the fourth section offers a brief digression on Knight’s relationship with American institutionalism; the fifth section deals with the later developments of Knight’s antipositivism; the final section presents some conclusions
    Keywords: Knight, Frank; Economic methodology; Economics and physics; American institutionalism
    JEL: B31 B41 B40 B21
    Date: 2015–01
  2. By: Andrew E. Clark; Sarah Flèche; Claudia Senik
    Abstract: In spite of the great U-turn that saw income inequality rise in Western countries in the 1980s, happiness inequality has fallen in countries that have experienced income growth (but not in those that did not). Modern growth has reduced the share of both the “very unhappy” and the “perfectly happy”. Lower happiness inequality is found both between and within countries, and between and within individuals. Our cross-country regression results argue that the extension of various public goods helps to explain this greater happiness homogeneity. This new stylised fact arguably comes as a bonus to the Easterlin paradox, offering a somewhat brighter perspective for developing countries.
    Keywords: Happiness; inequality; economic growth; development; Easterlin paradox
    JEL: D31 D6 I31 O15
    Date: 2014–10
  3. By: Andreas Ortmann (School of Economics, Australian School of Business, the University of New South Wales); Benoit Walraevens (Centre for Research in Economics and Management,Université de Caen Basse Normandie)
    Abstract: Analyzing the rhetorical structure of The Wealth of Nations (Smith WN) and its context, we make the case for the central importance of its Book V, "Of the Revenue of the Sovereign or Commonwealth”, which tends to be neglected in most accounts of Smith’s oeuvre (even, most recently, in the outstanding Phillipson 2010) but which in our reading is, rather than a general treatise on optimal taxation and spending, a book focused on the future of an empire being threatened by a Mercantilist system. The Empire in question was, of course, the British one. Book V follows Book IV, in which Smith -- after having documented the slow and unnatural progress of opulence in, among others, England and Scotland in Book III – had undertaken a “very violent attack” (Smith EPS p. 208; Smith Corr. p. 251) on those responsible for the low growth rates (“opulence”) in Scotland and, even more, England: manufacturers and merchants and those politicians who propagated Mercantilist philosophies and practices of the commercial class. Aware that those he targeted would not take kindly to the attack, Smith made his case against the Mercantilist system as well as its colonial policy by marshaling his earlier insights into rhetorical theory and practice. We explain why and how he organized his attack.
    Keywords: Adam Smith, The Wealth of Nations, rhetoric, rhetorical structure of The Wealth of Nations
    JEL: B10 B12 C70 C72
    Date: 2015–01
  4. By: Ran Spiegler
    Abstract: I present a framework for analyzing decision makers with an imperfect understanding of their environment's correlation structure. The framework borrows the tool of "Bayesian networks", which is ubiquitous in statistics and artificial intelligence. In the model, a decision maker faces an objective multivariate probability distribution (his own action is one of the random variables). He is characterized by a directed acyclic graph over the set of random variables. His subjective belief filters the objective distribution through the graph via the factorization formula for Bayesian networks. This representation of the relation between objective and subjective distributions enables us to capture a variety of systematic departures from rational expectations, such as excessively coarse subjective models, reverse causality, missing variables, and various attribution errors. Optimal choices in this model is fundamentally an equilibrium notion, because the decision maker's own long-run behaviour may affect his perception (via his distorted beliefs) of the consequences of his own actions. Accordingly, I define a "personal equilibrium" notion of optimal choices. A few stylized macroeconomic illustrations of this framework are presented. In particular, I formalize the intuition that an incorrect causal interpretation of the debt-output correlation may lead to sub-optimal fiscal policy, and I translate Sargent's (1999) argument that a mis-specified Phillips curve can cause a central banker to implement above-optimal inflation.
    JEL: J1
    Date: 2014–07
  5. By: Ian Gough
    Abstract: Since climate change threatens human wellbeing across the globe and into the future, we require a concept of wellbeing that encompasses an equivalent ambit. This paper argues that only a concept of human need can do the work required. It compares need theory with three alternative approaches. Preference satisfaction theory is criticised on the grounds of subjectivity, epistemic irrationality, endogenous and adaptive preferences, the limitlessness of wants, the absence of moral evaluation, and the non-specificity of future preferences. The happiness approach is found equally wanting. The main section shows how these deficiencies can be addressed by a coherent theory of need. Human needs are necessary preconditions to avoid serious harm, are universalisable, objective, empirically grounded, non-substitutable and satiable. They are broader than ‘material’ needs since a need for personal autonomy figures in all theoretical accounts. While needs are universal, need satisfiers are most often contextual and relative to institutions and cultures. The satiability and non-substitutability of needs is critical for understanding sustainability. The capability approaches of Sen and Nussbaum are compared but argued to be less fundamental. Finally, human needs provide the only concept that can ground moral obligations across global space and intergenerational time and thus operationalise ‘sustainable welfare’.
    Keywords: Human needs; welfare theory; wellbeing; global justice; intergenerational justice; sustainability; preferences; capabilities
    JEL: B5 I00 P46 Z13
    Date: 2014–07
  6. By: Kakarot-Handtke, Egmont
    Abstract: The core problem of economics is that the representative economist never managed to keep political and theoretical economics properly apart. The mixture is toxic indeed. As Joan Robinson said about what parades as economics: Scrap the lot and start again. Yet, the question then arises where to start. To solve the Starting Problem - first formulated by J. S. Mill - is the all-dominant initial step of a paradigm shift. The most urgent task of a constructive Heterodoxy is to rethink pivotal concepts like market, Say's Law, profit, etcetera. The reconstruction of the theoretical superstructure from scratch is an absolute methodological necessity.
    Keywords: new framework of concepts; structure-centric; Law of Supply and Demand; market clearing; budget balancing; full employment; indifference
    JEL: B59 E10
    Date: 2015–01–28
  7. By: Annette Bauer; Jennifer Francis
    JEL: N0
    Date: 2013–11–22
  8. By: Grossman, Richard; Rockoff, Hugh T
    Abstract: In this paper we trace the evolution of the lender of last resort doctrine—and its implementation—from the nineteenth century through the panic of 2008. We find that typically the most influential economists “fight the last war”: formulating policy guidelines that would have dealt effectively with the last crisis or in some cases the last two or three. This applies even to the still supreme voice among lender-of-last-resort theorists, Walter Bagehot, who wrestled with the how to deal with the financial crises that hit Britain between the end of the Napoleonic Wars and the panic of 1866. Fighting the last war may leave economists unprepared for meeting effectively the challenge of the next war.
    Keywords: Bagehot; Bank of England; central banks; lender of last resort; subprime crisis
    JEL: B0 N2
    Date: 2015–01
  9. By: Chapra, M. Umer (The Islamic Research and Teaching Institute (IRTI))
    Abstract: The generally recognized economic problem of mankind is how best to satisfy the basic needs of all people around the world in spite of the prevailing scarcity of resources. Since this is not happening, the paper argues that the primary reason is the secular worldview which has weakened the social and ethical foundations of human life and placed primary reliance on the market mechanism to ensure efficiency as well as justice in the use of resources. This has inadvertently ended up providing sanctity to the social-Darwinist principles of ‘struggle for existence’ and ‘survival of the fittest’. The result is that the concepts of economic man and the serving of self-interest by maximizing wealth and want satisfaction have gained supremacy. In sharp contrast with this, the worldview of most religions, and particularly that of Islam, emphasizes the concepts of human brotherhood and the well-being of all and provides certain moral restraints on the serving of self-interest. While it recognizes the important role of the market mechanism for this purpose, it does not consider it to be sufficient. It provides a moral orientation to all human activity, including the market mechanism, so that they operate within the framework of moral principles emanating from Divine revelations which treat all human beings as brothers and the resources at their disposal as a trust from God. The whole paper hovers around a discussion of how such a worldview can help solve the economic problem efficiently as well as equitably.
    Date: 2015–01–20
  10. By: Yannai A. Gonczarowski; Moshe Tennenholtz
    Abstract: Drawing intuition from a (physical) hydraulic system, we present a novel framework, constructively showing the existence of a strong Nash equilibrium in resource selection games with nonatomic players, the coincidence of strong equilibria and Nash equilibria in such games, and the invariance of the cost of each given resource across all Nash equilibria. Our proofs allow for explicit calculation of Nash equilibrium and for explicit and direct calculation of the resulting (invariant) costs of resources, and do not hinge on any fixed-point theorem, on the Minimax theorem or any equivalent result, on the existence of a potential, or on linear programming. A generalization of resource selection games, called resource selection games with I.D.-dependent weighting, is defined, and the results are extended to this family, showing that while resource costs are no longer invariant across Nash equilibria in games of this family, they are nonetheless invariant across all strong Nash equilibria, drawing a novel fundamental connection between group deviation and I.D.-congestion. A natural application of the resulting machinery to a large class of constraint-satisfaction problems is also described.
    Date: 2014–12
  11. By: Bernardo Alves Furtado; Patrícia Alessandra Morita Sakowski
    Abstract: Este texto está inserido no projeto Modelagem de Sistemas Complexos para Políticas Públicas e faz uma resenha dos autores clássicos que, em conjunto, contribuíram com os elementos do que seria uma “ciência da complexidade”. Com base no pensamento original destes autores, os conceitos centrais de sistemas complexos são discutidos, a saber: i) a interação entre agentes (homogêneos ou heterogêneos) e o ambiente; ii) as propriedades emergentes e a auto-organização; iii) a importância da não linearidade e das escalas; iv) as regras e seu determinismo; v) a ênfase na dinâmica e retroalimentação; e vi) as noções de adaptação, aprendizado e evolução. Por fim, críticas contemporâneas são apresentadas. Elas sugerem que os argumentos de sistemas complexos não sustentam epistemologicamente a constituição de suposta nova ciência, mas não rejeitam os avanços propostos nos estudos de complexidade. This text was written as part of the project ‘Modelling of Complex Systems for Public Policy’. It reviews the classical authors who jointly contributed to establish the elements of what could constitute a ‘science of complexity’. Based on the original writings of these authors, the text discusses the central concepts of complex systems: i) the interaction between (homogeneous or heterogeneous) agents and the environment; ii) emergence and self-organization; iii) the importance of not nonlinearity and scales; iv) the determinism of rules; v) the emphasis on dynamics and feedback; and vi) the notions of adaptation, learning and evolution. Finally, contemporary critics are presented. They suggest that the arguments of complex systems do not support the establishment of a supposed new science epistemologically, but they do not reject the advances proposed by complexity studies
    Date: 2014–12
  12. By: Enrico Colombatto; Valerio Tavormina
    Abstract: This article discusses whether altruism justifies ad-hoc legislation with reference to three different contexts. One is defined by the libertarian notion of liberty, a second framework corresponds to the egalitarian vision, and a third one originates from social-contract theory. It is shown that current legislation is rather ambiguous and sometimes even contradictory. By and large, the common-law view tends to favour the libertarian approach, while the civil-law visions are closer to what one might expect from social-contract theory, where the letter of the law is often questioned by the academic community and by the judiciary, and decisions eventually follow the judges' discretionary power.
    Keywords: Altruism, libertarianism, egalitarianism
    JEL: D64 K19 K39
    Date: 2015–01
  13. By: Ron Peretz; Gilad Bavly
    Abstract: A decision maker observes the evolving state of the world while constantly trying to predict the next state given the history of past states. The ability to benefit from such predictions depends not only on the ability to recognize patters in history, but also on the range of actions available to the decision maker. We assume there are two possible states of the world. The decision maker is a gambler who has to bet a certain amount of money on the bits of an announced binary sequence of states. If he makes a correct prediction he wins his wager, otherwise he loses it. We compare the power of betting strategies (aka martingales) whose wagers take values in different sets of reals. A martingale whose wagers take values in a set A is called an A-martingale. A set of reals B anticipates a set A, if for every A-martingale there is a countable set of B-martingales, such that on every binary sequence on which the A- martingale gains an infinite amount at least one of the B-martingales gains an infinite amount, too. We show that for two important classes of pairs of sets A and B, B anticipates A if and only if the closure of B contains r A, for some positive r. One class is when A is bounded and B is bounded away from zero; the other class is when B is well ordered (has no left-accumulation points). Our results generalize several recent results in algorithmic randomness and answer a question posed by Chalcraft et al. (2012).
    Keywords: repeated games; gambling; algorithmic randomness; pseudo-randomness; predictability
    JEL: C72 C73
    Date: 2014
  14. By: Tommaso Flaminio; Lluis Godo; Hykel Hosni
    Abstract: This paper sheds new light on the subtle relation between probability and logic by (i) providing a logical development of Bruno de Finetti's conception of events and (ii) suggesting that the subjective nature of de Finetti's interpretation of probability emerges in a clearer form against such a logical background. By making explicit the epistemic structure which underlies what we call Choice-based probability we show that whilst all rational degrees of belief must be probabilities, the converse doesn't hold: some probability values don't represent decision-relevant quantifications of uncertainty.
    Keywords: events; de Finetti's coherence criterion; informations frames; choice-based probability
    JEL: C02
    Date: 2014–09
  15. By: Chiara Fumagalli (Università Bocconi, CSEF and CEPR); Massimo Motta (ICREA-Universitat Pompeu Fabra and Barcelona Graduate School of Economics)
    Abstract: Recent cases in the US (Meritor, Eisai) and in the EU (Intel ) have revived the debate on the use of price-cost tests in loyalty discount cases. We draw on existing recent economic theories of exclusion and develop new formal material to argue that economics alone does not justify applying a price-cost test to predation but not to loyalty discounts. Still, the latter contain features (they reference rivals and allow to discriminate across buyers and/or units bought) that have a higher exclusionary potential than the former, and this may well warrant closer scrutiny and more severe treatment from antitrust agencies and courts.
    Keywords: Market-share discounts, Inefficient foreclosure, Exclusive dealing
    JEL: K21 L41
    Date: 2015–01–22
  16. By: Olivier Driessens
    Abstract: This article proposes to redefine celebrity as a kind of capital, thereby extending Bourdieu’s field theory. This redefinition is necessary, it is argued, because one of the main limitations shared by current definitions of celebrity is their lack of explanatory power of the convertibility of celebrity into other resources, such as economic or political capital. Celebrity capital, or broadly recognizability, is conceptualized as accumulated media visibility that results from recurrent media representations. In that sense, it is a substantial kind of capital and not a subset or special category of social or symbolic capital, the latter being defined as legitimate recognition by other agents in a social field. Rather than adding another definition of celebrity next to many others, the notion of celebrity capital proposed here should be seen as an attempt to integrate the existing approaches of celebrity into a single comprehensive conceptualization that can enable us to grasp this societal and cultural phenomenon better.
    Keywords: celebrity; definition; field theory; Bourdieu; symbolic capital; media
    JEL: L91 L96
    Date: 2013–09
  17. By: Christopher Phelan; Aldo Rustichini
    Abstract: Inherent in the definition of Pareto efficiency is the idea that, in dynamic environments, an individual is indexed by the history of events up to his birth (rather than, as usual, the date of birth). Here, we explore the implications of this natural formulation. The set of Pareto efficient allocations that is consistent with this view is potentially larger than those considered so far in the literature. We show that the set of allocations is strictly larger because we do not require individuals to have insurance motives of the Harsanyi-Rawls type regarding risks on their own type realization. We do, however, maintain the insurance motives of parents toward their children. Even in our more general framework, efficiency criteria impose substantial restrictions on the set of allocations. Interestingly, the restrictions are of a new nature. Our different, more natural view has some important policy implications. The first is that some policy criteria (for example, the progressive nature of taxes) cannot be defended on efficiency grounds, once the Harsanyi-Rawlsian insurance criterion is rejected as being normatively unsound. Second, we show that the condition of imposing no taxes of any kind, coupled with each agent owning his own production, results in a Pareto efficient allocation.
    JEL: D6 E24 H21
    Date: 2015–01
  18. By: Kamei, Kenju
    Abstract: People are interacting more with strangers thanks to recent technological advancement in online platforms. Online interactions can be characterized by infinitely-repeated games. Recent studies have shown that institutions that make people’s decisions open to others may enhance cooperation in these situations. But it is still unknown whether people can successfully cooperate with each other by choosing to show their identities and building good reputation when there is an option to hide them. We deal with this question using an experimental laboratory. Our experiment shows that a non-negligible fraction of people conceal their identities and people fail to cooperate with each other if hiding identities is free. However, almost all show their identities and successfully achieve cooperation with their partners if a small explicit cost is charged for act of hiding.
    Keywords: experiment, cooperation, reputation, prisoner dilemma game, internet, infinitely-repeated games
    JEL: C73 C92 D70 M21
    Date: 2015–01–27
  19. By: Gimenez-Nadal, J. Ignacio (University of Zaragoza); Molina, José Alberto (University of Zaragoza)
    Abstract: This paper analyzes differences in daily happiness between those individuals in the United States who perform voluntary activities during the day, and those who do not. Using the Well-Being Module of the American Time Use Survey 2010, we initially find that those who devote any time to voluntary activities during the day report higher levels of daily happiness than those who do not. Comparing the happiness obtained from a range of activities, we find that volunteering is among the most enjoyable, indicating that time spent on voluntary activities is utility-enhancing. But when the issue of reverse causality is taken into account, we find no differences in daily happiness between volunteers and non-volunteers, which indicates that happier individuals are also more likely to volunteer. We document that the effect of voluntary activities on the experienced utility of individuals can be decomposed into a "time-composition" effect and a "personality" effect, with the latter explaining between 11% and 46% of the observed difference.
    Keywords: voluntary activities, time use survey, experienced utility
    JEL: D13 J16 J22
    Date: 2015–01
  20. By: Newton, Jonathan
    Abstract: Differing degrees of assortativity in matching can be expected to have both genetic and cultural determinants. When assortativity is subject to evolution, the main result of of Alger and Weibull (2013) on the evolution of stable otherregarding preferences does not hold. Instead, both non-Nash and Pareto inefficient behavior are evolutionarily unstable.
    Keywords: evolution, moral values, assortative matchingCreation-Date: 2014-10
  21. By: Damiano de Felice
    Abstract: The publication of the Thun Group’s discussion paper The Guiding Principles on Business and Human Rights: An Interpretation for Banks represented a critical step on the way to delineate the relationship between the financial sector and human rights: the document lays the foundations for the adoption of the first ever comprehensive guide on how universal banks should operationalise their responsibility to respect human rights. As the arguments offered by the Thun Group are likely to influence the way in which numerous financial institutions integrate human rights into their operations, this article offers a critical assessment of the discussion paper. Notwithstanding several positive features, the Thun Group relies on a faulty subsidiary approach, avoids fundamental issues like access to effective remedy and downplays the importance of effective engagement with affected stakeholders.
    Keywords: banks; finance; Thun Group; Guiding Principles; business and human rights
    JEL: F3 G3
    Date: 2014–05–01
  22. By: Bullard, James B. (Federal Reserve Bank of St. Louis)
    Abstract: St. Louis Fed President James Bullard evaluated FOMC forecasts for 2014 and discussed implications for monetary policy in 2015. During an event in Chicago, he noted that the FOMC has been surprised in the same way two years in a row regarding its forecasts. He said that the nature of the surprise pulls the FOMC in two different directions on monetary policy.
    Date: 2015–01–16
  23. By: Zingales, Luigi
    Abstract: Academics' view of the benefits of finance vastly exceeds societal perception. This dissonance is at least partly explained by an under-appreciation by academia of how, without proper rules, finance can easily degenerate into a rent-seeking activity. I outline what finance academics can do, from a research point of view and from an educational point of view, to promote good finance and minimize the bad.
    Keywords: financial development; financial integration; rent seeking
    JEL: G00 O43
    Date: 2015–01
  24. By: Bjørnskov, Christian (Research Institute of Industrial Economics (IFN))
    Abstract: In this paper, I explore the politically contested association between the degree of capitalism, captured by measures of economic freedom, and the risk and characteristics of economic crisis. After offering some brief theoretical considerations, I estimate the effects of economic freedom on crisis risk in the post-Cold War period 1993-2010. I further estimate the effects on the duration, peak-to-trough GDP ratios and recovery times of 212 crises across 175 countries within this period. Estimates suggest that economic freedom is robustly associated with smaller peak-to-trough ratios and shorter recovery time. These effects are driven by regulatory components of the economic freedom index.
    Keywords: Crisis; Economic freedom; Institutions
    JEL: O11 O43 P16
    Date: 2015–01–23
  25. By: Ricardo Alonso; Heikki Rantakari
    Abstract: We analyze a class of sender-receiver games with quadratic payoffs, which includes the communication games in Alonso, Dessein and Matouschek (2008) and Rantakari (2008) as special cases, for which the receiver's maximum expected payoff when players have access to arbitrary, mediated communication protocols is attained in one-round of face-to-face, unmediated cheap talk. This result is based on the existence for these games of a communication equilibrium with an infinite number of partitions of the state space. We provide explicit expressions for the maximum expected payoff of the receiver, and illustrate its use by deriving new comparative statics of the quality of optimal communication. For instance, a shift in the underlying uncertainty that reduces expected conflict can worsen the quality of communication.
    Keywords: communication equilibrium; information transmission; mediation; one-shot cheap talk
    JEL: C72 D70 D83
    Date: 2014–07–31
  26. By: Jeanet Bentzen (Department of Economics, Copenhagen University.); Jacob Gerner Hariri (Department of Economics, Copenhagen University); James A. Robinson (Department of Government, Harvard University)
    Abstract: We document that rules for leadership succession in ethnic societies that antedate the modern state predict contemporary political regimes; leadership selection by election in indigenous societies is associated with contemporary representative democracy. The basic association, however, is conditioned on the relative strength of the indigenous groups within a country; stronger groups seem to have been able to shape national regime trajectories, weaker groups do not. This finding extends and qualifies a substantive qualitative literature, which has found in local democratic institutions of medieval Europe a positive impulse towards the development of representative democracy. It shows that contemporary regimes are shaped not only by colonial history and European in uence; indigenous history also matters. For practitioners, our findings suggest that external reformers' capacity for regimebuilding should not be exaggerated.
    Date: 2014–12–20

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