Quiz 2 Flashcards
crony capitalism
friends of the dictator are allowed to start a firm but not everyone
inclusive institutions
the 2 functions for all
unbiased system of law
secure property rights
provision of public services
creative destruction
allow people to choose their careers
extractive institutions
the 2 functions but only for a portion of the population
goal = extract incomes and wealth from one subset of society to benefit a different subset
the higher the pop density, the worse the institutions
security of property right
0 = no incentive to invest
10 = incentives to invest
reversal of fortunes
rich become poor and poor become rich
creative destruction
new firms can replace older firms
Virginia Company
company that 1st settled in N America
3 steps of Virginia Company
- tried to enslave the local pop
- enslaved their own
- inclusive eco institutions to attract settlers
2 conditions for inclusive political institutions
- strong centralized state
- pluralism
pluralism
a broad cross-section of society in power
checks and balances by judiciary, parliamentary system
free press
vibrant civil society able to organize, solve the collective action problem, protest and threaten revolution
free and fair elections
negative feedback loop
extractive institutions in the past feed extractive institutions in the future
2 conditions for extractive institutions
1) high mortality rate of settlers
2) high population density
positive feedback loop
political power to a broad cross-section -> inclusive political institutions -> inclusive eco institutions
extractive political and inclusive eco
instead of extracting -> implement institutions to increase the size of the pie and tax the pie
2 issues with extractive political and inclusive eco
1) commitment issue
2) fear of creative destruction
