-
The Political Economy of Collective Action, Inequality, and Development
Available May 5, 2020Chapter Abstracts
Endorsements
Preface
Chapter Summary -
Collective Action and Exchange: A Game-Theoretic Approach to Contemporary Political Economy
William D. Ferguson,
Stanford University Press, 2013
Stanford University Press Links:
Overview
Table of contents:
Introduction: A Farmer’s Market:
Amazon Links:
Look Inside:
Customer Reviews, including one by Herbert Gintis:
Other:
Detailed Table of Contents:
Abstract
This book asserts that successful economic development relies on innumerable exchanges whose presence requires resolution of collective-action problems (CAPs). CAPs,sometimes called social dilemmas, arise when pursuit of individual interest generates undesirable group outcomes. Pollution, crime, and failure to contribute to public goods are typical examples. A social environment of mutual distrust that inhibits exchange indicates unresolved CAPs. The complex exchanges that accompany economic development depend on credible commitments to abide by agreements and contracts. Credibility, in turn, requires coordination, enforcement, and mutual trust—resolution of CAPs. CAPs, moreover, provide the core rationale for policy: policies strive to resolve or ameliorate CAPs—or sometimes create or exacerbate them. This book merges recent developments in political economy that rarely appear together. Its discussion combines rational-actor theory, information economics, behavioral economics, institutional theory, and social network theory. It incorporates concepts of moral hazard, social preference, social norms, formal institutions, bounded rationality, policy process, and power. Using these concepts, it asserts that resolving the nexus of CAPs that underlie complex exchange requires both motivation and shared understandings; these arise from mixtures of reciprocal behavior, social norms, and formal rules. Moreover, processes of resolving CAPs inextricably link power, distribution, and growth. To illustrate these points,this book employs a game-theoretic methodology that can represent interactions ranging from two-person exchanges to crowd behavior, or exchanges among nations. This book endeavors to bring the political economy of collective action to the forefront of economic and social scientific debates, curriculum,and policy analysis. It offers an accessible tool for advanced undergraduate economics majors, and sufficient depth for interested graduate students in economics, political science, policy, and sociology. It may also prove valuable to policy research staffers who wish to enhance their grasp of political economy theory—specifically on how collective action relates to exchange and development. In Collective Action and Exchange: A Game-Theoretic Approach to Contemporary Political Economy, William D. Ferguson presents a comprehensive political economy text aimed at advanced undergraduates in economics and graduate students in the social sciences. The text utilizes collective action as a unifying concept, arguing that collective-action problems lie at the foundation of market success, market failure, economic development, and the motivations for policy. Ferguson draws on information economics, social preference theory, cognition theory, institutional economics, as well as political and policy theory to develop this approach. The text uses classical, evolutionary, and epistemic game theory, along with basic social network analysis, as modeling frameworks. These models effectively bind the ideas presented, generating a coherent theoretic approach to political economy that tresses sometimes overlooked implications.
Endorsements for The Political Economy of Collective Action, Inequality, and Development,
“Development failure is, at its root, a failure of collective action. This excellent book applies the tools of game theory to shed systematic light on circumstances that promote or hinder social coordination. One of its great strengths is the development of a broad typology of institutional settlements, permitting contextual analysis.”
—Dani Rodrik, Harvard University
“Collective action is an age-old human concern. In today’s world, which is an amalgam of globalization and fractiousness never seen before, it has acquired a new urgency. There is an awareness that not just development but human survival depends on society’s capacity to solve its collective action problems. William Ferguson’s superb new book draws on game theory, economics, and political science to present a state-of-the-art commentary on this important subject. This is a book that will be widely read by students, I am sure, and by policy makers, I hope.”
—Kaushik Basu, Cornell University
“Economic prosperity is always and everywhere a product of human cooperation. This accessible and fascinating book provides a treasure trove of insights into how cooperation succeeds or fails to bootstrap its way to the stable, effective institutions that are required for growth and development.”
—Eric Beinhocker, Executive Director, Institute for New Economic Thinking, University of Oxford
“Why do some countries see increases in standards of living and human development while others stagnate? Drawing from game theory, history, psychology and political economy, William Ferguson theorises that the roots of economic and social progress lies in how societies resolve collective action problems. The theoretical arguments are backed by carefully constructed country case-studies. In this important book, Ferguson provides an original and compelling answer to perhaps the important question in development economics.”
—Kunal Sen, Director, UNU-WIDER and Professor of Development Economics, University of Manchester
“Cutting-edge scholarship on the political economy of development has accepted the need to go beyond the mantra of ‘institutions matter’ and to take power and politics much more seriously. Bill Ferguson’s new book offers the most coherent and rigorous statement of how this can be done and sets a new standard for the field. It is a tour de force.”
—Samuel Hickey, Professor of Politics and Development, The University of Manchester
Chapter Abstracts of The Political Economy of Collective Action, Inequality, and Development
Why do some societies achieve high standards of living, relatively broad access to education and quality health care, serviceable infrastructure, predictable and largely impersonal legal procedures, and relatively accessible avenues to peaceful political expression, while others stagnate with guarded islands of extravagant wealth, surrounded by oceans of poverty, corrupt autocratic systems, and simmering conflicts—or even full-blown civil wars? Why, did South Korea, a dictatorship that faced devastating war from 1950-1954, and whose 1960 GDP per capita was half that of Mexico and twice that of India, have, by 2015, a per capita GDP that exceeded Mexico’s by a factor of three and India’s by a factor of 17—in addition to a largely peaceful transition to democracy? How might a society, trapped in stagnation, corruption, and repression, initiate and sustain processes of economic and political development?
Introduction: Towards a Political Economy Framework for Development Theory
How can social scientists address the complexity of the myriad interrelations between economic development, political development, inequality, and human ability to achieve cooperative collective action across groups and populations of individuals who hold widely divergent backgrounds, positions, interests, and perceptions? This book navigates the difficult terrain between universal-principle, one-size-fits-all frameworks on one hand, and approaches that insist that every society is unique. Using principles of political economy outlined in five core developmental hypotheses as well as a method for drawing distinctions between basic types of political-economic context, this book constructs a typology that relates distributions of power to specific configurations of institutional systems and social orders. Each component of the typology points to specific types of collective-action problems that condition a society’s ability to achieve economic and political development. Policy analysis should pay attention to such contextual influence. Additionally, this framework can spawn a large theoretical and empirical research program.
Chapter 1: Collective-Action Problems and Institutional Systems
A society’s prospects for development depend on its ability to resolve collective-action problems (CAPs). Resolution depends on underlying institutional contexts. Inequality permeates these interactions. This chapter introduces CAPs, institutions, institutional systems, social orders, and political settlements. CAPs arise when individuals, pursuing their own goals, generate undesirable outcomes for some group. First-order CAPs concern forms of free riding; second–order CAPs concern orchestrating the coordination and enforcement that render agreements to limit free riding credible. Discussion proceeds to distinguish informal and formal institutions (norms and rules) from organizations (structured groups of individuals that can take action). Institutional systems are complementary mixes of institutions and organization, where the latter play critical roles in resolving second-order CAPs. Social orders are large-scale institutional systems. Political settlements are mutual understandings that limit organized violence by addressing broad allocations of authority and benefits. Institutions and political settlements shape a society’s ability to resolve developmental CAPs.
Chapter 2: Economic Development, Political Development, and Inequality
This chapter augments Chapter 1’s foundations with detail on political and economic development, inequality, their interactions, and associated CAPs. Development entails sustained, widespread improvement of economic and political capabilities. Economic development includes steady growth in per-capita income, education, health care, and infrastructure, with attention to deprivation, poverty, broader inequities, and associated avenues and barriers to achievement. It also involves creating functional economic institutions. Political development entails steady augmentation of a state’s ability to provide public goods and services; protect economic, political, and civil rights; and create and enforce impartial rules (a rule of law). It also involves broad access to political decision making, limiting authority, mobilizing public participation, and enhancing the legitimacy of underlying procedures. Inequality has multiple dimensions (income, wealth, access); achieving equity along one dimension often compromises that for another. Multiple types of inequality are both outcomes of and conditions that shape development. Multiple CAPs ensue.
Chapter 3: Public Goods, Externalities, and Collective-Action Problems of Governance
This chapter addresses the book’s first developmental hypothesis and its relations to CAPs that complicate establishing functional governance: Development requires creating arrangements that deliver key public goods and services and concurrently mitigate important negative externalities. Externalities are either positive or negative impacts of economic or political interactions on the non-involved. Negative externalities include pollution and the spread of contagious disease; they arise from activities such as coal-powered electricity generation, crime, lack of sanitation, overuse of natural resources (e.g., deforestation), and excess conflict. Using game theoretic logic, this chapter develops a few simple models that illustrate the basic CAPs and more detailed models that address how the political and economic incentives of rival coalitions influence the ability and motivation of governments to develop, utilize, and broadly or selectively apply state fiscal and legal capacity. The chapter concludes by discussing capacity traps: self-reinforcing combinations of low fiscal and legal capacity.
Chapter 4: Economic Foundations of Unequal Development: Non-rival Knowledge, Social Imitation, Skill Complementarity, and Production Externalities
Development requires both ability and coordination, but the abilities and practices that facilitate coordinating production contribute decisively to inequality. The second hypothesis: inherent properties of knowledge transmission, the skill-matching requirements of team production, patterns of social imitation, and production interdependencies generate starkly unequal locational and sectoral agglomerations of production, knowledge acquisition, innovation, and growth. To illustrate these points, this chapter relates individual incentives to invest in acquiring skills and education to these influences. People in areas with high concentrations of knowledge and skill encounter strong incentives to work on acquiring knowledge—and vice versa. Additionally, developing sophisticated production techniques requires a critical mass of suitable firms in order to create viable markets and for skilled labor and sophisticated equipment. Difficult coordination CAPs lead to patterns of unbalanced growth. Finally, rural-urban migration often reinforces these locational dynamics. Unless policy successfully intervenes CAPs of inequitable access, unequal growth, and social conflict follow.
Chapter 5: Social Conflict: Power, Institutional Formation, and Credible Commitment
This chapter develops a social conflict theory of institutions. The third hypothesis posits that unequal distributions of power shape the creation, evolution, and demise of economic and political institutions. A background discussion defines power—a slightly slippery concept—and addresses key sources and manifestations of power. Unequal distributions of power then generate a series of CAPs associated with asymmetric influence on institutional construction and evolution. A flowchart model illustrates. To complicate matters, the fourth hypothesis posits that powerful parties cannot, left to themselves, credibly promise to avoid using their power for their future gain—often at the expense of others. Specifically, without institutional and motivational constraint, powerful parties may seize the gains from others’ investments in potentially fruitful economic and political activities. Functional development thus requires resolving multiple, largely second-order, CAPs related to credibly restraining powerful actors—when such actors, simultaneously, exert disproportionate influence over institution building.
Chapter 6: Policy Innovations Sometimes Relax Political Constraints
Development requires institutional change. This chapter suggests a ray of hope. Policy innovations can enhance capacities for resolving CAPs, relaxing political impediments to development—notably CAPs from the previous hypotheses. South Korea’s 1950s land reform policy established foundations for subsequent development. Innovations, however, emerge and spread within political contexts; institutional change presents formidable CAPs. Distinct individual as opposed to organizational capacities for information processing, combined with asymmetric distributions of power, typically generate relatively long periods of institutional and policy stability which occasionally succumb to rapid change: punctuated equilibria. Within such contexts, coalitions vie for influence, using policy narratives and images (mini ideologies) to legitimate their influence and discredit opponents. Yet, internal or external developments, such as technological change, shift shared perceptions and distributions of power, building up tensions so that relatively small focusing events may allow the entry of many new ideas, ushering in rapid change: punctuation, policy emergence.
Chapter 7: Alternative Typologies of Social Orders and Political Settlements
This chapter summarizes several approaches to categorizing social orders and political settlements on the basis of elemental political and institutional characteristics. A political settlement is a mutual understanding, held among parties with power, that they will primarily rely on politics rather than violence to resolve disputes. Discussion opens with a one-dimensional mapping of social orders, based on institutional strength and access—ranging from a chaos order through three types of limited access orders to an open access order. Societies can move in either direction. Next, a two-dimensional approach shows four combinations of institutional strength and competitive or dominant political settlements. A third approach offers three typologies. The first relates political settlements to institutional strength. The second denotes alternative distributions of power between included and excluded groups, and such distributions within included groups. The third addresses business power and capabilities. These conceptions inform Chapter 8’s approach to political settlements.
Chapter 8: How Context Influences Development: A New Typology of Political Settlements
Political settlements underlie institutional construction and thus a society’s prospects for development. Without some mutually understood method for settling major disputes though politics rather than organized violence, institutions cannot resolve CAPs that impede development. This chapter develops my approach to categorizing political settlements. It offers a framework that permits systematic inquiry into relationships between distributions of power, institutional evolution, and prospects for resolving a series of context-specific CAPs of achieving economic and political development. Political settlements differ fundamentally according to their social foundations—which groups are party to the settlement—and their configuration of authority among insider elites. A four-quadrant typology distinguishes between broad and narrow social foundations and coherent (unipolar) vs. disorganized (multipolar) configurations of authority. Additionally, the presence of resource constraints and mutually understood threats to elite political survival conditions motivations to create institutions. These distinctions imply context-specific CAPs that shape prospects for development in relevant areas.
Chapter 9: Business-State Interactions
This chapter extends chapter 8’s political settlement framework by addressing business-state interactions operating within specific types of settlements. Three levels of interaction follow. At the macro level, political settlements shape such interactions. At an intermediate (meso) level,
market configurations—that is their degrees of competitiveness and domestic vs. export orientation—affect the demands businesses place on the state. These dynamics influence the accessibility (openness) of micro-level exchange agreements (deals) as well as their credibility—specifically, the degree to which they are ordered, meaning honored and predictable, or disordered. A shift from disordered to ordered deals reflects resolution of second-order CAPs of enforcing agreements. Such a shift can prompt growth accelerations that facilitate escaping poverty traps. More substantial development, however, requires addressing Chapter 4’s complex coordination CAPs. Finally, the revenues that emerge from various market configurations feed back into distributions of power that may influence the longevity of particular political settlements.
Conclusion: A New Conceptual Framework for Development Theory
Development entails sustained enhancement of economic and political capabilities across a society’s members and groups. This text presents a conceptual framework, fully developed in Chapters 8 and 9, that addresses the social scientist’s dilemma concerning how to approach systematic inquiry into the myriad complexities of political-economic development. To address pertinent contexts, this framework systematically addresses interactions between asymmetric distributions of power and institutional evolution. It relates distinct types of political settlements to distinct sets of developmental CAPs that shape development. Related inquiry can then focus on how principles from the five core hypotheses operate in specific political-economic contexts. Such analysis can uncover how specific types of policy innovations relate to prospects for successful adoption within specific contexts. This framework can also underlie broad research programs with many theoretical and modeling extensions as well as multiple testable empirical hypotheses. Discussion closes with a few suggested extensions of this conceptual framework.
Preface: Sapiens and Neanderthals
Thanks to their ability to invent fiction, Sapiens create more and more complex games, which each generation develops and elaborates even further. – Yuval Noah Harari (2015)
According to historian Yuval Noah Harari (2015), from about 70,000 to 30,000 years ago, Homo sapiens vied with Homo neanderthalensis for dominance in areas of Europe and the Middle East. The Neanderthals were larger, stronger, better adapted to cold climates, and had larger brains. They also used tools and knew how to care for their sick. Neanderthals could dominate in one-on-one combat. Yet, sapiens ultimately prevailed. Indeed, they exterminated the Neanderthals. Sapiens triumphed because they had developed collaborative cognitive abilities that Neanderthals simply lacked. Specifically, sapiens developed the ability to tell stories, not just about lions in bushes, but also about each other—that is, to gossip. This capability permitted forms of cooperation that Neanderthals could not achieve; it fostered organizing cooperative activity among individuals, solving collective-action problems. Concurrently, Sapiens developed the ability to talk about things not present, “things they have never seen, touched, or smelled. . . Only Homo sapiens can speak about things that don’t really exist, and believe six impossible things before breakfast” (2015, 24). Sapiens learned to share legends, myths, gods, and other abstract concepts (relevant later on) like nationhood. They shared stories that could forge common purpose, common identity, and ideologies. “But fiction has enabled us to not merely imagine things, but to do so collectively” (25; emphasis in text). Collective storytelling facilitated rapid social adaptation to changing environments. To alter group behavior, Sapiens could change shared stories—a process much faster than genetic evolution. This “cognitive revolution” ushered in the triumph of Homo sapiens over Homo neanderthalensis.
Before 10,000 years ago, Sapiens spread across the planet and survived as foragers. In terms of leisure and arguably quality of work, they achieved relatively high standards of living. Normally, work did not exceed 35-40 hours per week and it involved multiple stimulating tasks. Foragers ate varied and balanced diets and exercised substantially. Children who survived their first few years had good prospects of living at least until 60, sometimes 80. With multiple sources of food, deprivation of one type rarely led to starvation.
About 9,500 years ago, however, Sapiens began to develop agriculture. The agricultural revolution, unfolded over the next 7,000 years, extending across the globe via simultaneous invention. Cultivating crops was not the idea of a single person or group, but rather an adaptation to roughly similar environmental conditions scattered around the globe. The agricultural revolution, which Harari calls history’s greatest fraud, vastly improved food productivity permitting substantial population growth. It also brought more labor, more disease (transmitted between humans and domesticated animals), lower life expectancies, additional reasons for territorial conflict, graver consequences to losing such conflicts—such as starvation, which might also arise from drought or insects—and dimensions of inequality and social hierarchy that Sapiens had not previously experienced. Whereas this shift in production benefited the species as a whole (the gene pool), most individuals—except those at the top of the hierarchy—experienced more deprivation. Adaptive human activity—sensible in multiple relevant contexts—fostered more work for mere survival, more disease, etc. From the point of view of the peasant masses, the agricultural revolution introduced many new collective-action problems. How might they work together to escape toil, disease, instances of starvation, and the often cruel authority of those at the top of social hierarchies?
Chapter Summary of The Political Economy of Collective Action, Inequality, and Development
Why do some societies achieve high standards of living, relatively broad access to education and quality health care, serviceable infrastructure, predictable and largely impersonal legal procedures, and relatively accessible avenues to peaceful political expression, while others stagnate with guarded islands of extravagant wealth, surrounded by oceans of poverty, corrupt autocratic systems, and simmering conflicts—or even full-blown civil wars? Why, did South Korea, a dictatorship that faced devastating war from 1950-1954, and whose 1960 GDP per capita was half that of Mexico and twice that of India, have, by 2015, a per capita GDP that exceeded Mexico’s by a factor of three and India’s by a factor of 17? How might a society trapped in stagnation initiate and sustain processes of economic and political development?
This book constructs a theoretical framework for systematically conceptualizing three related developmental themes. First, economic and political development requires resolving complex sets of underlying collective-action problems. Collective-action problems (CAPs) arise whenever individuals, pursuing their own interests, generate undesirable outcomes for one or more groups. Crime and pollution are examples—as is building infrastructure and forging arrangements that can settle disputes without resorting to violence. For its part, development entails steady, widespread improvements in human capabilities. It involves not only creating viable opportunities, but also removing barriers and other sources of deprivation, such as discrimination and poverty. Development has intertwined economic and political components, including sustained improvements in living standards, widespread provision of public goods and services such as health care, education and basic infrastructure, continuously strengthening institutional arrangements that protect economic, political, and civil rights, and simultaneously fostering widespread economic and political participation. CAPs infuse these processes, often inhibiting efforts towards such achievement. Indeed, development typically requires reforming or replacing formal institutions, with a complementary evolution of informal institutions, in the face of opposition from powerful beneficiaries.
The second theme follows directly: a society’s prospects for resolving fundamental CAPs—and therefore its potential set of developmental trajectories—depends critically on underlying political-economic context, notably on interactions between power relationships and institutional configurations, both of which emerge from prior political contestation and corresponding attempts to resolve CAPs or undermine their resolution. Third, economic and political inequality permeate these processes—doing so as an outcome, an impetus, and an impediment to development. Stark inequities pose a host of related CAPs.
After introducing these themes and key concepts in Part I, this book’s conceptual framework unfolds in two stages. Part II relates the three themes to five key developmental hypotheses, with attention to relationships among them, sometimes with game-theoretic illustrations. On this conceptual foundation, Part III examines and constructs several typologies of social orders and political settlements. By identifying distinct types of political/economic contexts that condition the resolution of developmental CAPs, these typologies, with a few illustrative games, facilitate systematic analysis of how context influences developmental prospects: a platform for policy implications, more specific models, and hypotheses.
Part I: Foundations of Unequal Development
Part I introduces core statements, defines basic terms, and develops background concepts.
Chapter 1: Collective-Action Problems and Institutional Systems
This chapter discusses the underlying concepts of CAPs, institutions, institutional systems, and political settlements.
• Section 1: First- and Second-Order Collective-Action Problems
• Section 2: Institutions, Organizations, Institutional Systems, and Social Orders
• Section 3: Institutional Systems and Collective-Action Problems
• Section 4: Political Settlements and Limiting Organized Violence
• Section 5: The Path of this Book
Chapter 2: Economic Development, Political Development, and Inequality
This chapter augments Chapter 1’s foundations with concepts of political and economic development, dimensions of inequality, and interactions between inequality and development.
• Section 1: Political Development
• Section 2: Economic Development
• Section 3: Development and Inequality
Part II: Five Developmental Hypotheses and Associated Collective Action Problems
Part II explains and applies five related developmental hypotheses from separate segments of the literature, unifying their implications by linking them to categories of developmental CAPs.
Chapter 3: Public Goods, Externalities, and Collective-Action Problems of Governance
This chapter addresses the first developmental hypothesis and its relations to a set of CAPs that complicate efforts to establish relevant mechanisms of governance.
H1: Development requires establishing social arrangements that deliver key public goods and services and concurrently mitigate important negative externalities.
• Section 1: Public Goods, Externalities, and Development
• Section 2: H1 CAPs and Fiscal Capacity
• Section 3: Legal Capacity and Second-Order CAPs of Enforcing Rights and Agreements
• Section 4: Summary and Conclusion
Chapter 4: Economic Foundations of Unequal Development: Non-rival Knowledge, Social Imitation, Skill Complementarity, and Production Externalities
Development requires both ability and coordination, but the abilities and practices that underlie coordination—or lack thereof—contribute decisively to social inequity. Four types of spatial and sectoral complementarities lead to significant coordination problems that both reflect and imply inherent CAPs of unequal and uneven development. The second hypothesis follows.
H2: Inherent complementarities that emerge from the non-rival properties of knowledge, skill matching, social imitation, and production externalities, separately and in combination, generate uneven locational and sectoral agglomerations of production, knowledge acquisition, innovation, and growth.
• Section 1: Knowledge, Social Imitation, Skill Clustering, and Agglomeration
• Section 2: How Production Externalities Enhance CAPs of Unequal Development
• Section 3: Spatial Location, Urbanization, Internal Migration, and Unbalanced Growth
Unequal development both reflects and generates social conflict.
Chapter 5: Social Conflict: Power, Institutional Formation, and Credible Commitment
This chapter addresses two social conflict hypotheses that concern how distributions of power—a key axes of social conflict—affect political economic outcomes via their impacts on institutional evolution and the credibility of commitments.
H3: Unequal distributions of power shape the creation, evolution, and demise of economic and political institutions.
H4: Powerful parties, left to themselves, cannot credibly commit to refrain from using their power for their own future benefit.
• Section 1: Power: Sources, Manifestations, Dyads, and Triads
• Section 2: Asymmetric Power and Institutional Evolution
• Section 3: The Developmental Logic of Credible Commitment
• Section 4: Developmental Implications of Social Conflict Theory
Whereas Chapters 3-5 imply daunting developmental CAPs, Chapter 6 offers a ray of hope.
Chapter 6: Policy Innovations Sometimes Relax Political Constraints
Development requires institutional change. This chapter addresses how policy and organizational innovations can enhance capacities for resolution of CAPs and so relax political impediments to development, with attention to meso-level policy dynamics. Specifically,
H5: Policy innovations sometimes relax political and commitment constraints that follow from H3 and H4, as well as free-riding and coordination CAPs from H1 and H2.
• Section 1: Innovation to Circumvent Political Constraints
• Section 2: Macro-Level Institutional Change, Reform, and Policy Innovation
• Section 3: Meso-Level Stability, Policy Subsystems, and Advocacy Coalitions
• Section 4: Policy Emergence and Punctuation
Part III: Social Order Typologies and New Framework for Development Theory
Part III develops a new conceptual framework for development theory. Applying logic from Part II’s hypotheses, it presents several platforms for methodical inquiry—notably typologies of social orders and political settlements and applicable logic. This approach permits systematic categorization and analysis of developmental obstacles (CAPs), with attention to underlying political/economic contexts. As mutual understandings that (by-and-large) establish politics rather than violence as the primary social mechanism for handling disputes, political settlements underlie institutional systems and corresponding social orders. Classification of political settlements on the basis of their social foundations and configurations of authority facilitates inquiry into relationships between distributions of power, the composition and motivation of political constituencies, configurations of institutions, distributions of benefits, CAPs, and developmental prospects. Ultimately, this framework offers analytical foundations for evaluating broad approaches to developmental policy in relation to (ever-present) CAPs that emerge within the associated institutional and social contexts.
Chapter 7: Alternative Typologies of Social Orders and Political Settlements
This chapter summarizes several current approaches to categorizing social orders and political settlements.
• Section 1: Antecedents to Political Settlement Typologies: Acemoglu and Robinson’s Political Equilibria and North Wallis and Weingast’s One-dimensional Spectrum of Social Orders
• Section 2: Levy’s Two-Dimensional Typology of Institutional Strength and Political Settlements
• Section 3: The Concept of Political Settlements and Khan’s Three Typologies
• Section 4: Market Configurations and Ordering Deals: Pritchett, Sen, and Werker’s Typologies
These approaches inform Chapter 8’s approach.
Chapter 8: A New Typology of Political Settlements
Consider these two questions:
i. How can we characterize a set of underlying political conditions that influence prospects for development?
ii. How do such conditions relate to a series of collective-action problems that permeate developmental processes?
This chapter develops a two-dimensional, four quadrant typology of political settlements based on social foundations and configurations of authority, with an additional distinction between ‘paths’ within two of its quadrants. Analysis of pertinent CAPs follows.
• Section 1: The Concept of Political Settlements
• Section 2: How Context Influences Development: Political Settlements and CAPs
• Section 3: Conclusion
Chapter 9: Business-State Interactions
Why, in many developing countries do dramatic declines follow rapid bursts of growth? How do interactions between economic and political contexts affect long-term developmental prospects? How do economic outcomes reinforce or undermine political settlements? This chapter extends chapter 8’s analysis by relating (meso-level) market configurations to (macro-level) environments denoted by specific types of political settlements, with attention to the implied potential for making credible economic agreements (i.e., resolving associated CAPs).
• Section 1: Economic Development and Commitment: Achieving Credible Deals in Unipolar Political Settlements
• Section 2: Multipolar Configurations
• Section 3: Summary and Conclusion
Chapter 10: Conclusion: A Framework for Development Theory
This chapter reviews key points of the argument and points to areas for further development, noting potential modeling extensions that could, in turn, generate a series of testable hypotheses.
