I recently read a couple of interesting economic history papers on the interactions between institutions, economic and political power, and economic growth. The first was the econ-famous paper, The Rise of Europe: Atlantic Trade, Institutional Change, and Economic Growth, by Harvard economists Daron Acemoglu, Simon Johnson, and James Robinson, which has managed to rack up 682 citations (so says Google Scholar). The second was the less-cited (12) but equally-good paper, The Open Constitution and its Enemies: Competition, Rent Seeking, and the Rise of the Modern State, by Oliver Volckart of LSE.
I recently came across a newish article titled ‘Schumpeter and the end of Western Capitalism’ by William Kingston in the Journal of Evolutionary Economics. This line in particular caught my eye: “The decline of capitalism began when financiers were released from this discipline, and it ended with the catastrophe caused by belief that bureaucratic control could replace it.”
Overall the paper sketches what is a very interesting thesis (Schumpeter’s, that is) placed in the context of the GFC and beyond. Well worth the read. It is good to see someone calling out the crisis for what it was – something of a Schumpterian-Minskian-Olsonian-Hayekian Frankenstein’s monster. The common thread: overcentralisation and the pathology of control. It blows my mind that people writing decades ago, up to a century ago, could be so prescient.
The abstract is below and a link to the article is here.
Below are some words from Richard E. Wagner’s article ‘Retrogressive regime drift within a theory of emergent order’ published in the Review of Austrian Economics in 2006 (Rev Austrian Econ (2006) 19: 113–123). This is the earliest – indeed, the only! – work I have found on the link between degeneracy and robustness in political economic systems. The paper is very good, but even so, what is reproduced below is all there seems to be on this important topic – about 500 words – in the entire literature. Suffice to say, much more work is needed on this interesting topic.
In a nutshell, Wagner’s hypothesis is:
[…] robustness is facilitated through polycentric organizational arrangements that entail high degeneracy, while fragility and the emergence of decadence is facilitated in relatively hierarchical arrangements that possess low degeneracy.