Wealth-Destroying States

Forthcoming, Public Choice

34 Pages Posted: 3 May 2019

See all articles by Jennifer Brick Murtazashvili

Jennifer Brick Murtazashvili

University of Pittsburgh

Ilia Murtazashvili

University of Pittsburgh - Graduate School of Public and International Affairs

Date Written: April 1, 2019

Abstract

According to the contract theory of the state, individuals give up their freedom to a specialist in violence who then provides public goods, such as private property rights and collective defense. The predatory perspective views the state as expropriating what it can unless individuals develop institutions of collective action to limit the scope of the state. We extend those economic theories of the state by showing how the behavior of rulers depends on political stability, political constraints, self-governance, and foreign intervention. We use evidence from Afghanistan to illustrate how political instability and the absence of meaningful political constraints enables the predatory state to flourish. Foreign aid and foreign military intervention amplify the wealth-destroying features of political institutions. Customary self-governance provides public goods locally, but is only a partial defense against predatory rulers and can be overwhelmed by predatory self-governing organizations, especially warlords and the Taliban.

Keywords: Contract theory of the state, Predatory theory of the state, Political institutions, Polycentricity, Spontaneous order, Self-governance, Foreign aid, Afghanistan

JEL Classification: B52, B53, H11, Q15

Suggested Citation

Murtazashvili, Jennifer Brick and Murtazashvili, Ilia, Wealth-Destroying States (April 1, 2019). Forthcoming, Public Choice, Available at SSRN: https://ssrn.com/abstract=3363817

Ilia Murtazashvili

University of Pittsburgh - Graduate School of Public and International Affairs ( email )

Pittsburgh, PA 15260-0001
United States

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