ECON 866 Development Economics Fall 2010 Thursday, 4:30-7:10, Robinson Hall A109. Telephone Office Enterprise 326

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1 ECON 866 Development Economics Fall 2010 Thursday, 4:30-7:10, Robinson Hall A109 Professor Peter T. Leeson Telephone Office Enterprise 326 Office Hours By appt. COURSE OBJECTIVES: This course investigates why some nations are rich while others are poor. Its goal is to provide you with a framework for exploring this question and to examine answers that economists have offered in response to it. REQUIRED MATERIALS: The reading for this course comes from two sources: excerpts from books, which are available in the university bookstore, and journal articles. Both are listed below. You may obtain these articles online (through JSTOR or elsewhere), via the link I ve provided on the reading list, or in the library. Required readings are indicated with an asterisk. The other readings are highly recommended, especially if you desire to pursue development as a field. But they aren t mandatory. This is a PhD-level course. You must do all of the required readings and come to class prepared to discuss them. Books: Bauer, Peter (2000). From Subsistence to Exchange, Princeton: Princeton University Press. de Soto, Hernando (1989). The Other Path, New York: Basic Books. Easterly, William (2001). The Elusive Quest for Growth, Cambridge: MIT Press. (Also recommended: Easterly, William (2006). White Man s Burden, New York: Penguin Press.) Hayek, F.A. (1980). Individualism and Economic Order, Chicago: University of Chicago Press. North, Douglass (1990). Institutions, Institutional Change and Economic Performance, Cambridge: Cambridge University Press. North, Douglass (2005). Understanding the Process of Economic Change, Princeton: Princeton University Press.

2 Econ Sen, Amartya (1999). Development as Freedom, New York: Anchor Books. TENTATIVE SCHEDLUE OF TOPICS: 1. Understanding the Central Problem: Information and Incentives (September 16) *Boettke, Peter, Christopher Coyne, Peter Leeson and Frederic Sautet (2005). The New Comparative Political Economy, Review of Austrian Economics, 18(3-4): Demsetz, Harold (1967). Toward a Theory of Property Rights, American Economic Review, 57(2): *Hayek, F.A. (1945). The Use of Knowledge in Society, American Economic Review, 35(4): *Hayek, F.A. (1937). Economics and Knowledge, Economica, 4(13): Hayek, F.A. (1980). Individualism and Economic Order, Chicago: University of Chicago Press. Chps *Mises, Ludwig von (1935). Economic Calculation in the Socialist Commonwealth, in F.A. Hayek, ed., Collectivist Economic Planning, London: George Routledge & Sons. *Shleifer, Andrei (2009). The Age of Milton Friedman, Journal of Economic Literature, 47(1): The Goals of Development and Getting the Policies Right (September 23) Becker, Gary, Thomas Philipson, and Rodrigo Soares (2005). The Quantity and Quality of Life and the Evolution of World Inequality, American Economic Review, 95(1): *Boettke, Peter and J. Robert Subrick (2003). Rule of Law, Development and Human Capabilities, Supreme Court Economic Review, 10: *Rodrik, Dani (2007). Growth Strategies, in Philippe Aghion and Steven Durlaf, ed., Handbook of Economic Growth. North-Holland: Elsevier. *Rodrik, Dani (2006). Goodbye Washington Consensus, Hello Washington Confusion?, Journal of Economic Literature, 44(4): Hausmann, Ricardo, Dani Rodrik, and Andres Velasco (2005). Growth Diagnostics, mimeo. *Mankiw, Gregory (1995). The Growth of Nations, Brookings Papers on Economic Activity, 1: Sachs, Jeffrey and Andrew Warner (1995). Economic Reform and the Process of Global Integration, Brookings Papers on Economic Activity, 1: *Sen, Amartya (1999). Development as Freedom, New York: Anchor Books. Chps *Warner, Andrew (2003). Once More into the Breach: Economic Growth and Integration, Center for Global Development Working Paper No

3 Econ *Easterly, William (2005). National Policies and Economic Growth: A Reappraisal, in Philippe Aghion and Steven Durlauf, eds. Handbook of Economic Growth, Amsterdam: North-Holland Foreign Aid (September 30) *Burnside, Craig and David Dollar (2000). Aid, Policies and Growth, American Economic Review, 94(4): *Brumm, Harold (2003). Aid, Policies and Growth: Bauer Was Right, Cato Journal, 23(2): Easterly, William, Ross Levine, and David Roodman (2004). Aid, Policies and Growth: Comment, American Economic Review, 94(3): *Heckelman, Jac and Stephen Knack (2008). Foreign Aid and Market-Liberalizing Reform, Economica, 75(299): *Ovaska, Tomi (2003). The Failure of Development Aid, Cato Journal, 23(2): *Bauer, Peter (2000). From Subsistence to Exchange, Princeton: Princeton University Press. *Easterly, William (2001). The Elusive Quest for Growth, Cambridge: MIT Press. Chps *Djankov, Simeon, Jose Montalvo, and Marta Reynal-Querol (2008). The Curse of Aid, Journal Economic Growth, 13(3): *Easterly, William (2007). Was Development Assistance a Mistake?, American Economic Review, 97(2): Getting the Institutions Right (October 7) *Acemoglu, Daron, Simon Johnson, and James Robinson (2001). The Colonial Origins of Comparative Development: An Empirical Investigation, American Economic Review, 91(5): *Acemoglu, Daron, Simon Johnson, and James Robinson (2002). Reversal of Fortune: Geography and Institutions in the Making of the Modern World Income Distribution, Quarterly Journal of Economics, 117(4): *Barro, Robert (1996). Democracy and Growth, Journal of Economic Growth, 1(1): *Glaeser, Edward, Rafael La Porta, Florencio Lopez-de-Silanes, and Andrei Shleifer (2004). Do Institutions Cause Growth?, Journal of Economic Growth, 9(3): La Porta, Rafael, Florencio Lopez-de-Silanes, Florencio, Andrei Shleifer, and Robert Vishny (1999). The Quality of Government, Journal of Law, Economics and Organization 15(1): *Lipset, Seymour (1959). Some Social Requisites for Democracy: Economic Development and Political Legitimacy, American Political Science Review, 53(1): *North, Douglass (1991). Institutions, Journal of Economic Perspectives, 5(1): *North, Douglass (1990). Institutions, Institutional Change and Economic Performance,

4 Econ Cambridge: Cambridge University Press. Chps. 1-4, Rodrik, Dani (1999). Where Did All the Growth Go? External Shocks, Social Conflict, and Growth Collapses, Journal of Economic Growth, 4(4): Rodrik, Dani (2000). Institutions for High-Quality Growth: What They Are and How to Acquire Them, Studies in Comparative International Development, 35(3): *Rodrik, Dani (2004). Institutions Rule: The Primacy of Institutions Over Geography and Integration in Economic Development, Journal of Economic Growth, 9(2) The Primacy of Private Property (October 14) *Acemoglu, Daron and Simon Johnson (2005). Unbundling Institutions, Journal of Political Economy, 113(5): Boettke, Peter (1994). The Political Infrastructure of Economic Development, Human Systems Management, 13: df *Coyne, Christopher and Peter Leeson (2004). The Plight of Underdeveloped Countries, Cato Journal, 24(3): *Gwartney, James, Randall Holcombe and Robert Lawson (1999). Economic Freedom and the Environment for Economic Growth, Journal of Institutional and Theoretical Economics 155(4): *Hanke, Steve and Stephen Walters (1997). Economic Freedom, Prosperity and Equality, Cato Journal, 17(2): *Hayek, F.A. (1980). Individualism and Economic Order, Chicago: University of Chicago. Chp. 5. *Johnson, Simon, John McMillan, and Christopher Woodruff (2002). Property Rights and Finance, American Economic Review, 92(5): *Kirzner, Israel (1997). Entrepreneurial Discovery and the Competitive Market Process: An Austrian Approach, Journal of Economic Literature, 35(1): Kirzner, Israel (1973). Competition and Entrepreneurship, Chicago: University of Chicago. Leglan, David (1996). Property Rights, Democracy and Economic Growth, Political Research Quarterly, 49(1): *Murphy, Kevin, Andrei Shleifer, and Robert Vishny (1991). The Allocation of Talent: Implications for Growth, Quarterly Journal of Economics, 106(2): *Scully, Gerald (1988). The Institutional Framework and Economic Development, Journal of Political Economy, 96(3): Political Self-Interest, Political Constraints, and Development (October 21) *Acemoglu, Daron and James Robinson (2000). Political Losers as a Barrier to Economic

5 Econ Development, American Economic Review Papers and Proceedings, 90(2): *Buchanan, James ([1986] 1992). Nobel Lecture, in Karl-Goran Maler, ed., Nobel Lectures, Economics , Singapore: World Scientific Publishing. *Djankov, Simeon, Edward Glaeser, Rafael La Porta, Florencio Lopez-de-Silanes, and Andrei Shleifer (2003). The New Comparative Economics, Journal of Comparative Economics, 31(4): Fernandez, Raquel and Dani Rodrik (1991). Resistance to Reform: Status Quo Bias in the Presence of Individual-Specific Uncertainty, American Economic Review, 81(5): *Frye, Timothy and Andrei Shleifer (1997). The Invisible Hand and the Grabbing Hand, American Economic Review, 87(2): *Tullock, Gordon (1967). The Welfare Costs of Tariffs, Monopoly and Theft, Western Economic Journal, 3: Persson, Torsten and Guido Tabellini (2004). Constitutional Rules and Fiscal Policy Outcomes, American Economic Review, 94(1): *Persson, Torsten and Guido Tabellini (2006). Democracy and Development: The Devil in the Details, American Economic Review, 96(2): *Weingast, Barry (1995). The Economic Role of Political Institutions: Market-Preserving Federalism and Economic Development, Journal of Law, Economics and Organization, 11(1): *Easterly, William (2001). The Elusive Quest for Growth, Cambridge: MIT Press. Chps Law and the Legal System (October 28) *Djankov, Simeon, Rafael La Porta, Florencio Lopez-de-Silanes, and Andrei Shleifer (2003). Courts, Quarterly Journal of Economics, 118(2): *Glaeser, Edward and Andrei Shleifer (2002). Legal Origins, Quarterly Journal of Economics, 117(4): Hayek, F.A. (1962). The Constitution of Liberty, Chicago: University of Chicago Press. Chps Hayek, F.A. ( ). Law, Legislation, and Liberty Vol. 1-2, Chicago: University of Chicago. *La Porta, Rafael, Florencio Lopez-de-Silanes, Cristian Pop-Eleches, and Andrei Shleifer (2004). Judicial Checks and Balances, Journal of Political Economy, 112(2): *La Porta, Rafael, Florencio Lopez-de-Silanes, and Andrei Shleifer (2008). The Economic Consequences of Legal Origins, Journal of Economic Literature 46(2): Priest, George (1977). The Common Law Process and the Selection of Efficient Rules, Journal of Legal Studies, 6(1): *Rubin, Paul (1977). Why is the Common Law Efficient,? Journal of Legal Studies, 6: The Geography and Fractionalization Connections (November 4)

6 Econ *Gallup, John, Jeffrey Sachs and Andrew Mellinger (1999). Geography and Economic Development, International Regional Science Review, 22(2): *Sachs, Jeffrey (2001). Topical Underdevelopment, NBER Working Paper No *Sachs, Jeffrey (2003). Institutions Don t Rule: Direct Effects of Geography on Per Capita Income, NBER Working Paper No *Sachs, Jeffrey and Andrew Warner (2001). The Curse of Natural Resources, European Economic Review, 45(4-6): Young, Alwyn (2005). The Gift of the Dying: The Tragedy of AIDS and the Welfare of Future African Generations, Quarterly Journal of Economics 120(2): Acemoglu, Daron and Simon Johnson (2007). Disease and Development: The Effect of Life Expectancy on Economic Growth, 115(6): *Easterly, William (2001). Can Institutions Resolve Ethnic Conflict?, Economic Development and Cultural Change, 49(4): *Easterly, William and David Levine (1997). Africa s Growth Tragedy: Policies and Ethnic Divisions, Quarterly Journal of Economics, 112(4): *Leeson, Peter (2005). Endogenizing Fractionalization, Journal of Institutional Economics, 1(1): *Leeson, Peter (2008). Social Distance and Self-Enforcing Exchange, Journal of Legal Studies 37(1): Leeson, Peter (2006). Cooperation and Conflict: Evidence on Self-Enforcing Arrangements Among Socially Heterogeneous Groups, American Journal of Economics and Sociology, 65(4): Anarchy, Development, and Informal Institutions (November 18) Banerjee, Abhijit and Esther Duflo (2000). Reputation Effects and the Limits of Contracting: A Study of the Indian Software Industry, Quarterly Journal of Economics, 115(3): *Benson, Bruce (1989). The Spontaneous Evolution of Commercial Law, Southern Economic Journal, 55(3): Dixit, Avinash (2004). Lawlessness and Economics: Alternative Modes of Governance, Princeton: Princeton University Press. Chps *Greif, Avner (1993). Contract Enforceability and Economic Institutions in Early Trade: The Maghribi Traders Coalition, American Economic Review, 83(3): Greif, Avner, Paul Milgrom and Barry Weingast (1994). Coordination, Commitment and Enforcement: The Case of the Merchant Guild, Journal of Political Economy, 102(4): *Hay, Jonathan and Andrei Shleifer (1998). Private Enforcement of Public Laws: A Theory of Legal Reform, American Economic Review, 88(2):

7 Econ *Khanna, Tarun and Jan Rivkin (2000) Ties that Bind Business Groups: Evidence from an Emerging Economy, Harvard Business School Strategy Unit Working Paper No *Leeson, Peter (2007). Trading with Bandits, Journal of Law and Economics, 50(2): *Leeson, Peter (2007). Efficient Anarchy, Public Choice, 130(1-2): *Leeson, Peter (2007). Better Off Stateless: Somalia Before and After Government Collapse, Journal of Comparative Economics 35(4): Leeson, Peter (2009). The Laws of Lawlessness, Journal of Legal Studies, 38(2): Leeson, Peter (2007). An-arrgh-chy: The Law and Economics of Pirate Organization, Journal of Political Economy 115(6): *Milgrom, Paul, Douglass North and Barry Weingast (1990). The Role of Institutions in the Revival of Trade: The Law Merchant, Private Judges, and the Champagne Fairs, Economics & Politics 2(19): *Nenova, Tatiana and Tim Harford (2004). Anarchy and Invention, World Bank Public Policy Journal, Note No *Rajan, Raghuram (2004). Assume Anarchy, Finance and Development, September: Media and Development (December 2) *Besley, Timothy and Robin Burgess (2002). The Political Economy of Government Responsiveness: Theory and Evidence from India, Quarterly Journal of Economics, 117(4): *Besley, Timothy and Andrea Prat (2006). Handcuffs for the Grabbing Hand? Media Capture and Government Accountability, American Economic Review, 96(3): *Coyne, Christopher and Peter Leeson (2003). Read All About It! Understanding the Role of Media in Economic Development, Kyklos, 57(1): *Djankov, Simeon, Caralee McLiesh, Tatiana Nenova, and Andrei Shleifer (2003). Who Owns the Media?, Journal of Law and Economics, 46(2): *Leeson, Peter (2008). Media Freedom, Political Knowledge, and Participation, Journal of Economic Perspectives 22(2): *Leeson, Peter and Christopher Coyne (2005). Manipulating the Media, Institutions and Economic Development, 1(2): Leeson, Peter and Christopher Coyne (2007). The Reformers Dilemma: Media, Policy Ownership, and Reform, European Journal of Law and Economics 23(3): Sen, Amartya (1999). Development as Freedom, New York: Anchor Books. Chp Getting the Culture Right (December 9)

8 Econ *Barro, Robert and Rachel McCleary (2003). Religion and Economic Growth across Countries, American Sociological Review, 68(5): *Boettke, Peter, Christopher Coyne, and Peter Leeson (2008). Institutional Stickiness and the New Development Economics, American Journal of Economics and Sociology 67(2): *Carilli, Anthony, Christopher Coyne, and Peter Leeson (2008). Government Intervention and the Structure of Social Capital, Review of Austrian Economics 21(2-3): *Coyne, Christopher and Peter Boettke (2006). The Role of the Economist in Economic Development, Quarterly Journal of Austrian Economics, 9(2): *de Soto, Hernando (1989). The Other Path, New York: Basic Books. Chps. 3, 5. Francois, Patrick and Jan Zabojnik (2005). Trust, Social Capital and Economic Development, Journal of the European Economic Association, 3(1): *Granovetter, Mark (1985). Economic Action and Social Structure: The Problem of Embeddedness, American Journal of Sociology, 91: *Grier, Robin (1997). The Effect of Religion on Economic Development: A Cross-National Study of Sixty-Three Former Colonies, Kyklos, 50(1): Hayek, F.A. (1988). The Fatal Conceit: The Errors of Socialism, Chicago: University of Chicago Press. Knack, Steven and Philip Keefer (1997). Does Social Capital Have an Economic Payoff? A Cross-Country Investigation, Quarterly Journal of Economics, 112(4): Woolcock, Michael (1998). Social Capital and Economic Development: Toward a Theoretical Synthesis and Policy Framework, Theory and Society, 27(2): *North, Douglass (2005). Understanding the Process of Economic Change, Princeton: Princeton University Press. Chps. 3-6, 9. *Tabellini, Guido (2010). Culture and Institutions: Economic Development in the Regions of Europe, Journal of the European Economic Association, 8(4): *Williamson, Claudia R. (2010). Informal Institutions Rule: Institutional Arrangements and Economic Performance, Public Choice, 139(3): *Williamson, Claudia R. and Carrie B. Kerekes (2010). Securing Private Property: Formal versus Informal Institutions, mimeo pdf?attredirects=0 *Williamson, Claudia R. (2010). Civilizing Society: Virtues, Freedom, and Development, mimeo. ects=0 GRADING: Your grade in this course is based on 11 quizzes and class participation. Each quiz will be worth five points and ask you a question about the assigned reading. At the end of the semester I will

9 Econ drop your highest quiz score. There are no make-up quizzes. Collectively, the quizzes constitute 50% of your final grade. The remaining 50% of your final grade is based on your participation in class. Here I will evaluate you in terms of both the quantity and quality of your contributions to the materials before us each week.