Extremism, Suicide Terror, and Authoritarism

This paper studies extremist behaviour, and its connection to authoritarianism. I divide extremists into two groups, leaders, who demand extremist acts such as assassinations, suicide terror or other forms of political violence from followers, who supply them. I assume that both the leaders of extremist groups and their followers are rational. The paper looks at three examples: Communism, Nationalism and Islamic Fundamentalism. I show that leaders with extreme ideologies also tend to adopt violent methods when there is an indivisibility between the intermediate goal of the group and its ultimate goal. Turning to followers, the most important innovation of the paper is a simple model which explains how it is possible for a person to rationally commit suicide to further the goals of a group. The most important policy implications of the paper are, firstly, that one should look at the goals of extremist group in order to understand their actions. If one can unbundle the goal or make the indivisible divisible, then there may be ways to provide these goals in a way which satisfies some of the potential supporters of the group and thus dries up support for the grander ambitions of the leaders of extremist groups. Secondly, the provision of programs which foster social cohesion tends to dry up an important motive for extremist activity: the desire for solidarity. Thirdly, policy towards terrorists should should combine the use of “carrot” and “stick”. Finally, I argue that authoritarian regimes rather than democracies or totalitarian regimes are the most likely sources of suicide terror. So democracy is indeed part of the solution to the problem of suicide terrorism.Terrorism; extremist ideologies; extremist groups; authoritarian regimes;suicide terrorists;

2001-11 Tax Evasion and Trust

this paper I take a "public choice" approach to the problem of tax evasion. The basic hypothesis of the field of economics known as "public choice" is that the citizens of democratic political jurisdictions perceive a connection between the taxes they pay and the government services they receive. In its strong form, the hypothesis is that citizens know that taxes are the "price" paid for public expenditures, part of an "implicit contract" with other citizens and with Bordignon (1993) develops a "fairness" approach in which public goods are introduced as well. In this model, an increase in tax rates yields more evasion, in accordance with the empirical evidence. 6 the government. In its strong form this would require that citizens are capable of some very sophisticated calculations. Still, in a democracy, citizens elect governments to provide them with goods and services and there is a certain sense in which every citizen must be aware that taxes must be paid to finance public services, whether they think their own burden is too high or low. And every citizen, even those residing in Ontario, Canada, where the government has been elected on and is carrying out an extensive program of tax cuts, must be aware that if taxes are reduced, a reduction in public services must follow. One version of this approach was used by Cowell and Gordon, who introduce public goods into the Yitzhaki model of tax evasion (1988). However the results remain at variance with the empirical evidence. Their result is that, if individuals display decreasing absolute risk aversion, the effect on tax evasion of an increase in the tax rate is positive or negative as public goods are under- or over-provided. Thus, if public goods are under-provided, an increase in tax rates means an increase in public ..

Privatization, The Market For Corporate Control, and Capital Flight From Russia

This paper will argue that the basic reason for the 2 flight of capital from Russia over the last few years is the neglect, during the transition, of property rights issues, and in particular of the property rights environment necessary to ensure adequate corporate governance and the resulting "incomplete" ownership structure typical of the Russian firm. This neglect has been common in the analysis of transition. Despite all of the work in the new institutional economics on property rights and despite the (admittedly crude) evidence of Wallis and North (1986) that about one-half of GNP is spent on "transactions services", theorists of the transition typically write as if, once freed from the government, enterprise managers will automatically be motivated to maximize profits, and markets will spontaneously arise to coordinate production. The emphasis during the transition was to remove enterprises from government control, that is, to privatize companies. The basic rationale for this was set out in Privatizing Russia (1995) and in other publications by the privatization team and advisers to it. In this and other publications, the focus was on the contrast between political control and control by private owners. Little emphasis was paid to the question of how to design appropriate institutions to ensure the transferability of ownership and how to discipline managers so that they would manage corporations in such a way as to breed investor confidence. The result has been a form of capitalism aptly dubbed "Weird Russian Capitalism" by Cottrell (1997) in which managers are entrenched in power in the enterprises in a way that they never were under the old central planning system, and it is not obvious how the system can ever be changed to breed investor confidence. Under the..