Following the bandit theme (from the stationary bandits in Congo), this time formal 'bandits' in "Calculating Bandits: Quasi-Corporate Governance and Institutional Selection in Autocracies" by Salter and Hall. While my (economic) Austrian-ness is limited, this is an interesting attempt to explain successful autocratic economies, not through a developmental state but rather through a firm-like approach (rent maximization)
Abstract: "This paper applies the logic of economic calculation to the actions of autocrats. We model autocrats as stationary bandits who use profit and loss calculations to select institutions that maximize their extraction rents. We find in many cases autocrats achieve rent maximization through creating and protecting private property rights. This in turn yields high levels of production, with expropriation kept low enough to incentivize continued high production. Importantly, while this leads to increasing quantities of available goods and services over time, it does not lead to true development; i.e. the coordination of consumer demand with producer supply through directing resources to their highest-valued uses. We apply our model to the authoritarian governments of Singapore and the United Arab Emirates, showing how they function as quasi-corporate governance organizations in the business of maximizing appropriable rents"
There is a clear selection bias, they explicitly choose two successful examples (Singapore and UAE). It would have been better if they would have also presented a failed case of quasi-corporate autocracy to show institutional design paths (instead of using Kuwait as a comparison, that is probably not a random choice).
Are we explaining away two outliers or a potential 'second-best' (third-best?) model for short/medium run economic success?
The authors do acknowledge some of the shortcomings of the paper, but I think they would have been better served by keeping it in draft form or as a discussion hypothesis as it feels like a weak case so far (case study development, comparative strength, testing the theory beyond two cases). Nevertheless, this feeds into a wider discussion of state formation and its role, institution design and political economy.
Abstract: "This paper applies the logic of economic calculation to the actions of autocrats. We model autocrats as stationary bandits who use profit and loss calculations to select institutions that maximize their extraction rents. We find in many cases autocrats achieve rent maximization through creating and protecting private property rights. This in turn yields high levels of production, with expropriation kept low enough to incentivize continued high production. Importantly, while this leads to increasing quantities of available goods and services over time, it does not lead to true development; i.e. the coordination of consumer demand with producer supply through directing resources to their highest-valued uses. We apply our model to the authoritarian governments of Singapore and the United Arab Emirates, showing how they function as quasi-corporate governance organizations in the business of maximizing appropriable rents"
There is a clear selection bias, they explicitly choose two successful examples (Singapore and UAE). It would have been better if they would have also presented a failed case of quasi-corporate autocracy to show institutional design paths (instead of using Kuwait as a comparison, that is probably not a random choice).
Are we explaining away two outliers or a potential 'second-best' (third-best?) model for short/medium run economic success?
The authors do acknowledge some of the shortcomings of the paper, but I think they would have been better served by keeping it in draft form or as a discussion hypothesis as it feels like a weak case so far (case study development, comparative strength, testing the theory beyond two cases). Nevertheless, this feeds into a wider discussion of state formation and its role, institution design and political economy.
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