ECON 313 Lecture Notes - Lecture 8: Positive Feedback, Industrial Revolution, Atlantic Slave Trade
15 Feb 2017
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Incentives to innovate with new technology and invest in education. The supplier of those institutions is the state (difficult for the private sector to coordinate and offer this). Strong centralized state (a weak state does not have the resources to implement them) Pluralistic state (a broad section of society in power, not only the elite: pluralism is different than democracy, key intuition: a broad cross section of society in power will demand inclusive institutions. Those (cid:449)ith e(cid:272)o(cid:374)o(cid:373)i(cid:272) (cid:396)esou(cid:396)(cid:272)es (cid:894)if the(cid:455) do(cid:374)"t ha(cid:448)e politi(cid:272)al po(cid:449)e(cid:396) they can acquire it by force if needed) If economic institutions at t-1 favor elite: extractive political institutions, extractive economic institutions, we get a negative feedback loop that is difficult to exit. If economic institutions at t-1: gains widely distributed: political power to broad section of society. Income inequality is at the heart of this theory.
