Roy Elis, Stephen Haber, and Jordan Horrillo
Why are some regions of the world populated by wealthy, democratic countries, while other regions are populated by poor, autocratic countries? A consensus answer to this puzzle has eluded scholars for the obvious reason that it is difficult to disentangle causality when there are endogenous relationships among the variables under study. The solution is straightforward in principle, but difficult in practice: build a theory that is based on exogenous factors, explain how those factors generated the conditions conducive to sustained, long-run, economic growth and democratic stability, and then test that theory against evidence. This paper offers such a theory and empirical tests of it based on geocoded datasets.
We find that basic geographic and climatologic constraints operating on food kilocalorie production, storage, and trade in the era before steam power structured the incentives of human beings. Those differences in incentives, operating on large numbers of people, over long periods of time, pushed societies down different long-run paths of development, which is to say that they gave rise to differences in emergent phenomena (e.g., levels of urbanization, levels and distributions of human capital) and differences in the laws and their enforcement mechanisms governing human behavior (the economic and political systems that social scientists often call “institutions”). Both the emergent phenomena and the institutions were characterized by increasing returns and path dependence. Some of those emergent phenomena and institutions—which for short we call “The Transactional State”—were conducive to sustained economic growth and the consolidation of democracy once the concept was (re)-introduced in the modern world. Other emergent phenomena and institutions made sustained growth and democratic stability in the modern world highly unlikely.
Stephen Haber is A.A. and Jeanne Welch Milligan Professor in the School of Humanities and Sciences and Peter and Helen Bing Senior Fellow of the Hoover Institution at Stanford University. He is also Professor of Political Science, Professor of History, and Professor of Economics (by courtesy), a Senior Fellow of the Stanford Institute for Economic Policy Research, and a Senior Fellow of the Stanford Center for International Development. Haber’s research spans a number of academic disciplines, including comparative politics, financial economics, and economic history. He has authored, coauthored, or edited ten books, and his papers have been published in journals such as American Political Science Review, World Politics, International Security, the Journal of Economic History, the Hispanic American Historical Review, the Journal of Banking and Finance, and the Journal of International Business Studies. Haber's most recent book, Fragile by Design: The Political Origins of Banking Crises and Scarce Credit (coauthored with Charles Calomiris) was published by Princeton University Press in 2014. His current research focuses on two areas: the impact of geography on the long-run evolution of economic and political institutions; and the political conditions under which societies sustain intellectual property systems that promote innovation.