Hierarchy, Liberty, and Innovation: Democracy's Unique Advantage in Promoting Growth Restated

Forthcoming from Kyklos, Vol. 71, No. 4, Nov. 2018

55 Pages Posted: 26 May 2018

See all articles by Shiping Tang

Shiping Tang

Fudan University - School of International Relations and Public Affairs (SIRPA)

Date Written: May 15, 2018

Abstract

Bringing together classic defense of liberty and democracy, the political economy of hierarchy, endogenous growth theory, and the new institutional economics on growth, we propose a new institutional theory that identifies democracy’s unique advantage in prompting economic growth. We contend that the channel of liberty-to-innovation is the most critical channel in which democracy holds a unique advantage over autocracy in promoting growth, especially during the stage of growth via innovation. Because all human societies are hierarchical and hierarchy facilitates growth by bringing stability and order yet harms innovation and growth by demanding obedience to authority, an economy must strike a balance between maintaining stability and facilitating innovation. Democracy achieves this balance by protecting liberty whereas autocracy sacrifices innovation for stability. Democracy thus does hold a unique advantage in promoting growth over autocracy, but this advantage is indirect, channel-specific, and conditional. Evidences from three historical cases demonstrate that although key scientific breakthroughs can indeed pop up under autocracies, democracy is a necessary, though insufficient, condition for protecting major scientific breakthroughs that may challenge orthodoxies.

Keywords: Democracy; Hierarchy, Liberty; Innovation; Growth; Institutional Theory

JEL Classification: O10, O11, O43, B15

Suggested Citation

Tang, Shiping, Hierarchy, Liberty, and Innovation: Democracy's Unique Advantage in Promoting Growth Restated (May 15, 2018). Forthcoming from Kyklos, Vol. 71, No. 4, Nov. 2018, Available at SSRN: https://ssrn.com/abstract=3179291

Shiping Tang (Contact Author)

Fudan University - School of International Relations and Public Affairs (SIRPA) ( email )

220 Handan Road
Shanghai, 200433
China

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