The Costs of Organized Violence: A Review of the Evidence

I critically review recent studies that estimate those costs of violence and conflict that can emerge among organized political groupings, from states, religious and ethnic organizations to guerillas and paramilitaries. The review includes studies that estimate direct and indirect costs due to internal conflicts (civil wars and other lower-level conflicts), terrorism, and external conflicts, including military spending. There are a number of key theoretical concerns on what counts as a cost, and, depending on the methods and evidence used, estimated costs vary widely. However, even minimum estimates are economically significant, especially for low-income countries. This is even more so when the costs of different types of organized conflict and violence are aggregated.Trade openness; Conflict; Property rights; Governance

Seven Myths about the Greek Debt Crisis

In Greece and other countries of the eurozone there are a number of misconceptions about the debt crisis. I argue against seven of such misconceptions (or, myths) about the effects of default, the primary cause of the crisis, the likely effects of an exit from the eurozone, the bargaining power of the Greek government in its negotiations with the EU/ECB/IMF troika, and others. Default and exit from the eurozone appears to be the most viable alternative in the long run; such a move would seem to require considerable preparation under short time constraints and a government with broad political support.Eurozone; Greece; debt, default

Policymaking in the Eurozone and the Core Vs. Perifphery Problem

I argue that the eurozoneÂ’s current problems are primarily structural: A weak central bank; the absence of fiscal coordination; fragmented bank supervision with individual countries having the ultimate responsibility for supporting banks but without the ability to print their own currency. At the same time, European elites of the core have been driven by very short-term objectives whereas the Greek and Irish governments have shown no appetite to represent their own citizens in negotiations. In the absence of any moves towards political integration and to avoid a probable disorderly exit, it is critical to formally establish an opt-out clause for exit from the eurozone and, in the meantime, rapidly prepare procedures for such an exit.

Bargaining Versus Fighting

I examine the determinants of conflict and settlement by embedding probabilistic contests in a bargaining framework. Different costly enforcement efforts (e.g., arming, litigation expenditures) induce different disagreement points and Pareto frontiers. After examining the incentives for settlement, I demonstrate how different division rules and bargaining norms have real, economic effects. I then analyze some sources of conflict. I emphasize long-term, strategic considerations by examining an illustrative model and discussing particular historical examples.Conflict; Negotiation; War; Settlement; Arming; Litigation

Restraining the genuine homo economicus: why the economy cannot be divorced from its governance

The Homo economicus of traditional economics is far from being completely self-interested, rational, or as individualistic as he is purported to be; he will haggle to death over price but will not take what he wants by force. Implicitly, he is assumed to behave ruthlessly within a well-defined bubble of sainthood. Based on a simple model, I first examine what occurs when this assumption is relaxed and genuine, amoral Homines economici interact. Productivity can be inversely related to compensation; a longer shadow of the future can intensify conflict; and, more competition among providers of protection reduces welfare. The patently inefficient outcomes that follow call for restraining self-interest, for finding ways to govern markets. I then review some of the different ways of creating restraints, from the traditional social contract, to the hierarchical domination of kings and lords, to modern forms of governance. Checks and balances, wider representation, the bureaucratic form of organization, and other ingredients of modern governance can partly be thought of as providing restraints to the dark side of self-interest. Though highly imperfect, these restraints are better than the alternative, which typically involves autocratic, amateurish, and corrupt rule. Then, thinking of most problems in terms of a first-best economic model is practically and scientifically misguided. -- Der Homo Economicus der klassischen Wirtschaftswissenschaften ist dadurch gekennzeichnet, dass er zwar bis in den Tod um Preise feilscht, sich aber niemals Dinge mit Gewalt aneignen würde. So betrachtet ist er nicht in jeder Hinsicht vollständig eigennützig und rational oder individualistisch. Diese Eigenschaften treffen nur auf eine Dimension seines Verhaltens zu, nämlich auf sein Verhalten im Marktgeschehen. In Hinblick auf das Respektieren von Eigentumsrechten verhält sich der Homo Economicus geradezu wie ein Heiliger. Basierend auf einer einfachen Analyse wird in der Arbeit untersucht, welche Konsequenzen die Lockerung dieser Annahme hat. Die Interaktion solcher nunmehr wirklich eigennütziger Homines Economici hat verschiedene Implikationen. Beispielsweise kann eine besonders hohe Produktivität eines Akteurs dazu führen, dass er eine besonders niedrige Entlohnung erhält. Auch kann die Möglichkeit zukünftiger Verhandlungen Konflikte in der Gegenwart verschärfen. Ferner wird ein stärkerer Wettbewerb zwischen Akteuren, die den Schutz von Eigentumsrechten anderer als Dienstleistung anbieten, die Wohlfahrt senken. Solche Ineffizienzen können dazu führen, dass es allokationspolitisch sinnvoll ist, den Eigennutz zu zügeln und Märkte zu regulieren. In der Arbeit werden verschiedene Möglichkeiten geprüft, solche Beschränkungen zu schaffen, vom traditionellen Gesellschaftsvertrag über die hierarchische Herrschaft von Königen und Adligen, bis hin zu modernen Regierungsformen. Checks and Balances, die umfassende Repräsentation, die bürokratische Organisationsform und andere Elemente des modernen Regierens können teilweise für Beschränkungen der dunklen Seite des Eigennutzes sorgen. Obwohl solche Formen der Beschränkung nicht sehr wirkungsvoll sind, sind sie gegenüber ihren Alternativen überlegen, die typischerweise mit autokratischer, amateurhafter und korrupter Herrschaft einhergehen.Conflict,property rights,governance

Proprietary Public Finance: On Its Emergence and Evolution Out of Anarchy

Proprietary rule, whereby the state is owned by a ruler who maximizes tax revenues minus the costs of governing, is a useful ideal type that describes many of the states that have ever existed. The study of proprietary rule and its public finance, however, is comparatively scarce. I argue that proprietary rule emerges out of anarchy and its main alternative - self-governance - has di¢ culties surviving because of problems in providing effective internal and external security. Competitive proprietary rule (or, anarchy) is the market structure for the provision of security that is more stable, but is highly inefficient because all the savings that come out of the public provision of security are dissipated into contests for power among proprietary rulers. I also explore how competitive proprietary rule can be consolidated into more complex forms of governance.

The Costs of Organized Violence: A Review of the Evidence

I critically review recent studies that estimate those costs of violence and conflict that can emerge among organized political groupings, from states, religious and ethnic organizations to guerillas and paramilitaries. The review includes studies that estimate direct and indirect costs due to internal conflicts (civil wars and other lower-level conflicts), terrorism, and external conflicts, including military spending. There are a number of key theoretical concerns on what counts as a cost, and, depending on the methods and evidence used, estimated costs vary widely. However, even minimum estimates are economically significant, especially for low-income countries. This is even more so when the costs of different types of organized conflict and violence are aggregated.conflict, property rights, governance

Policymaking in the Eurozone and the Core vs Periphery Problem

Geldpolitik; Finanzpolitik; Öffentliche Schulden; Eurozone; Europäische Wirtschafts- und Währungsunion