Calculating bandits: Quasi-corporate governance and institutional selection in autocracies

Alexander W. Salter, Abigail R. Hall

Research output: Contribution to journalArticle

12 Scopus citations

Abstract

This paper applies the logic of economic calculation to the actions of autocrats. We model autocrats as stationary bandits who use profit-andloss calculations to select institutions that maximize their extraction rents. We find in many cases autocrats achieve rent maximization through creating and protecting private property rights. This in turn yields high levels of production, with expropriation kept low enough to incentivize continued high production. Importantly, while this leads to increasing quantities of available goods and services over time, it does not lead to true development; that is, the coordination of consumer demand with producer supply through directing resources to their highest-valued uses. We apply our model to the authoritarian governments of Singapore and the United Arab Emirates, showing how they function as quasi-corporate governance organizations in the business of maximizing appropriable rents.

Original languageEnglish
Pages (from-to)193-213
Number of pages21
JournalAdvances in Austrian Economics
Volume19
DOIs
StatePublished - 2015

Keywords

  • Autocracy
  • Economic growth
  • Institutional selection
  • Stationary bandit

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