One of my brilliant young GMU colleagues, Pete Leeson, co-authored a fascinating paper with Claudia Williamson on anarchy and failed states. It’s entitled “Anarchy and Development: An Application of the Theory of Second Best“; here’s the abstract:
Could anarchy be a constrained optimum for weak and failing states? Although a limited government that protects citizens’ property rights and provides public goods may be the first-best governance arrangement for economic development, among the poorest nations such “ideal political governance” is not an option. LDCs face a more sobering choice: “predatory political governance” or no government at all. Many predatory governments do more to damage their citizens’ welfare than to enhance it. In light of this, we show that conditional on failure to satisfy a key institutional condition required for ideal political governance—constrained politics—citizens’ welfare is maximized by departing from the other conditions required for this form of governance: state-supplied law and courts, state-supplied police, and state-supplied public goods. Since departing from these conditions produces anarchy and fulfilling them when government is unconstrained producers predatory political governance, anarchy is a second best.
