Democracies vs. Dictatorships

I recently finished reading The Logic of Political Survival. Not the most rivetting read at times, but very interesting and one I'd recommend to anyone here.

Lee,

It's a great book, but general readers should be forewarned that it has a lot of math and formal theory intended for graduate students in political science and economics. But it also has a lot of incredibly interesting examples and applications to real world events that are accessible to a general audience and that you can enjoy without understanding the math.

Russ,

I bough Bruce's book after listening him on Econtalk. I find the book very entertaining so far (still ot finished), although I am not a political scientist by a long shot :-)


I'm not sure I share his ideas , but they are very interesting anyway.

I think selectorate theory neatly explains why foreign trade obstruction is so popular. Those that have the greatest incentive to change things are foreign, and are never part of the selectorate, nevermind the wnning coalition. The leader simply doesn't have to care, except for the threat of the retaliatory tariffs from other leaders.

In fact, come to think of it, given the political incentives, the only stable "game" of foreign trade may be one with limited tariffs, with each leader forever pushing toward greater and greater obstruction to foreign trade, limited only by the fact that exporters will soon complain at the retaliatory tariffs.

It's be interesting to study that one more closely, though someone else will have to since I sure do not have time.

To reiterate more clearly.

1) The leader should prefer borders completely closed to imports, since this protects coalition members from competition.

2) Since the competitors are foreign, they are never part of the selectorate and can be safely ignored, they pose no threat to the leaders power.

3) The leader should prefer borders completely open to exports, since this benefits those coalition members who can sell their goods and services abroad.

Given these incentives, leaders would prefer borders closed to imports to protect domestic business, and open to exports to benefit domestic business.

However, introduce two players and a game begins. If both leaders operated a import-closed, export-open policy, then exporters would have nowhere to export goods to, as all foreign markets would be closed to competition.

Pressure from exporters would encourage both leaders to open up the foreign market, weighed against pressure from domestic business to discourage imports. The leaders would barter tariff agreements with one another, trying to reach a compromise between their respective exporters and domestic businesses.

An equilibrium would be reached, which offered limited "protection" to domestic businesses, balanced against the pressure of domestic exporters to sell abroad.

Anyway, needs testing and formalising.

One last thing, honest.

I have read very little about export regulation. I would expect it to be nearly nonexistent (at least compared to imports), but I could be wrong. Anyone know more?

Lee,

I think Bruce would point out that it's very hard to succeed in a democracy if you only have the support of a few business leaders. You need general support. So it's not just exporters who are relevant, but consumers. Closing your borders to enrich a few businesses at the expense of the population at large is not the road to political success. So democracies tend to have open borders. That raises the standard of living of the median voter. Put another way, a large amount of protectionism is too expensive in a democracy. In a dictatorship, it might be worth it.

To reinforce Russ' comments...has any consideration been given to the role of those in the importing business. The real world usually starts with some amount of trade already underway. If the country is a heavy trader (e.g. USA), then presumably those importers (e.g. Walmart, Best Buy) would have just as effective a lobby as the domestic producers. In a sophisticated economy, you may even have a mix (e.g. Toyota is a domestic producer and importer). What about those companies that import part of their product to make a finished good (e.g. any auto manufacturer who imports foreign parts). The theory may only work in the limited world that may have only existed in the pre-industrial age.

"Closing your borders to enrich a few businesses at the expense of the population at large is not the road to political success."

True, unless the politicians can convince the population at large that protectionism is actually good for them. That seems to be the popular idea at the moment. It'll take another Smoot-Hawley disaster to wake us up again, at least for a while.

Lee is right, it is very hard to succeed in a democracy if you narrow support just to business people (whether exporters, importers, or strictly confined to domestic markets). A breif presentation of the argument and evidence from the selectorate theory perspective is found in The Logic of Political Survival, pp. 195-198.