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Anarchy and Development: An Application of the Theory of Second Best

Author

Listed:
  • Leeson Peter T.

    (George Mason University)

  • Williamson Claudia R.

    (Appalachian State University)

Abstract

Could anarchy be a constrained optimum for weak and failing states? Although a limited government that protects citizens' property rights and provides public goods may be the first-best governance arrangement for economic development, among the poorest nations such ``ideal political governance" is not an option. LDCs face a more sobering choice: ``predatory political governance" or no government at all. Many predatory governments do more to damage their citizens' welfare than to enhance it. In light of this, we show that conditional on failure to satisfy a key institutional condition required for ideal political governanceconstrained politicscitizens' welfare is maximized by departing from the other conditions required for this form of governance: state-supplied law and courts, state-supplied police, and state-supplied public goods. Since departing from these conditions produces anarchy and fulfilling them when government is unconstrained producers predatory political governance, anarchy is a second best.

Suggested Citation

  • Leeson Peter T. & Williamson Claudia R., 2009. "Anarchy and Development: An Application of the Theory of Second Best," The Law and Development Review, De Gruyter, vol. 2(1), pages 77-96, July.
  • Handle: RePEc:bpj:lawdev:v:2:y:2009:i:1:n:4
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    References listed on IDEAS

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    Cited by:

    1. Koyama, Mark, 2012. "The Law and Economics of Private Prosecutions in Industrial Revolution England," MPRA Paper 40500, University Library of Munich, Germany.
    2. Jürgen Wandel, 2011. "Business groups and competition in post-Soviet transition economies: The case of Russian “agroholdings”," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 24(4), pages 403-450, December.
    3. Andrew T. Young, 2015. "Hospitalitas," Working Papers 15-41, Department of Economics, West Virginia University.
    4. Leeson, Peter T. & Coyne, Christopher J., 2012. "Sassywood," Journal of Comparative Economics, Elsevier, vol. 40(4), pages 608-620.
    5. Olaf J. de Groot & Matthew D. Rablen & Anja Shortland, 2011. "Gov-aargh-nance - "even criminals need law and order"," CEDI Discussion Paper Series 11-01, Centre for Economic Development and Institutions(CEDI), Brunel University.
    6. repec:kap:ejlwec:v:45:y:2018:i:1:d:10.1007_s10657-017-9562-7 is not listed on IDEAS
    7. Peter Boettke, 2012. "An anarchist’s reflection on the political economy of everyday life," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 25(1), pages 1-7, March.
    8. Andrew Young, 2015. "From Caesar to Tacitus: changes in early Germanic governance circa 50 BC-50 AD," Public Choice, Springer, vol. 164(3), pages 357-378, September.
    9. Boettke, Peter & Fink, Alexander, 2011. "Institutions first," Journal of Institutional Economics, Cambridge University Press, vol. 7(04), pages 499-504, December.
    10. Mehrdad Vahabi, 2016. "A positive theory of the predatory state," Public Choice, Springer, vol. 168(3), pages 153-175, September.
    11. Andrew T. Young, 2016. "What does it take for a roving bandit settle down? Theory and an illustrative history of the Visigoths," Public Choice, Springer, vol. 168(1), pages 75-102, July.
    12. Boettke, Peter, 2011. "Anarchism and Austrian economics," MPRA Paper 33069, University Library of Munich, Germany.
    13. H. Sun & M. Bigoni, 2015. "A Fine Rule From a Brutish World? An Experiment on Endogenous Punishment Institution and Trust," Working Papers wp1031, Dipartimento Scienze Economiche, Universita' di Bologna.
    14. Vahabi, Mehrdad & Hassani-Mahmooei, Behrooz, 2016. "The role of identity and authority from anarchy to order: Insights from modeling the trajectory of dueling in Europe," Economic Modelling, Elsevier, vol. 55(C), pages 57-72.

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