Post by Sapphire Capital on Jul 19, 2008 21:57:46 GMT 4
Exiting a Lawless State
KARLA HOFF
World Bank - Development Economics Group (DEC)
JOSEPH E. STIGLITZ
Affiliation Unknown
--------------------------------------------------------------------------------
February 1, 2008
World Bank Policy Research Working Paper No. 4520
Abstract:
An earlier paper showed that an economy could be trapped in an equilibrium state in which the absence of the rule of law led to asset-stripping, and the prevalence of asset-stripping led to the absence of a demand for the rule of law, highlighting a coordination failure. This paper looks more carefully at the dynamics of transition from a non-rule-of-law state. The paper identifies a commitment problem as the critical feature inhibiting the transition: the inability, under a rule of law, to forgive theft. This can lead to the perpetuation of the non-rule-of-law state, even when it might seem that the alternative is Pareto-improving.
papers.ssrn.com/sol3/Delivery.cfm/4520.pdf?abstractid=1096012&mirid=4
KARLA HOFF
World Bank - Development Economics Group (DEC)
JOSEPH E. STIGLITZ
Affiliation Unknown
--------------------------------------------------------------------------------
February 1, 2008
World Bank Policy Research Working Paper No. 4520
Abstract:
An earlier paper showed that an economy could be trapped in an equilibrium state in which the absence of the rule of law led to asset-stripping, and the prevalence of asset-stripping led to the absence of a demand for the rule of law, highlighting a coordination failure. This paper looks more carefully at the dynamics of transition from a non-rule-of-law state. The paper identifies a commitment problem as the critical feature inhibiting the transition: the inability, under a rule of law, to forgive theft. This can lead to the perpetuation of the non-rule-of-law state, even when it might seem that the alternative is Pareto-improving.
papers.ssrn.com/sol3/Delivery.cfm/4520.pdf?abstractid=1096012&mirid=4