“Political decentralization and policy experimentation”

Since 1932, when Justice Louis Brandeis remarked that in a federal system states can serve as “laboratories” of democracy, political decentralization has been thought to stimulate policy experimentation. We reexamine the political economy behind this belief, using a simple model of voting in centralized and decentralized democracies. We find the electoral logic suggests the opposite conclusion: centralization usually leads to “too much” policy experimentation, compared to the social optimum, while decentralization leads to “too little”. Three effects of centralization—an “informational externality”, a “risk-seeking” effect, and a “riskconserving” effect—account for the different outcomes.

By Hongbin Cai & Daniel Treisman. Here’s the whole thing (pdf). This is probably more right than wrong, but you gotta wonder: what’s “the social optimum”?

Anti-Sikh Riots, Eastern Europe’s Normalcy

Here is a pdf from economists Andrei Shleifer and Daniel Treisman on life in Eastern Europe 25 years after the fall of the Berlin Wall:

Twenty-five years after the Berlin Wall came down, a sense of missed possibilities hangs over the countries to its east. Amid the euphoria that greeted the sudden implosion of communism, hopes ran high. From Bratislava to Ulaan Bataar, democracy and prosperity seemed just around the corner.

Yet, a quarter century on, the mood has changed to disillusion. With a few exceptions, the postcommunist countries are seen as failures—their economies peopled by struggling pensioners and strutting oligarchs, their politics a realm of ballot stuffing and emerging dictators.

Wars—from Nagorno-Karabakh to Yugoslavia, Chechnya, and now Eastern Ukraine— have punctured the 40 years of cold peace on the European continent, leaving behind enclaves of smoldering violence. Russian President Vladimir Putin’s consolidation of autocracy and imperial aggression seem to many emblematic of a more general rot spreading from the East.

[…]

We find that objective evidence contradicts the conventional view. Media images aside, life has improved dramatically across the former Eastern Bloc. Since the start of transition, the post-communist countries have grown rapidly. Their citizens live richer, longer, and happier lives. In most regards they look today just like other countries at similar levels of economic development. They have become normal countries—and in some ways “better than normal.”

If only this picture would garner as much attention as wars, protests, and economic downturns.

This week marks the 30th anniversary of the vicious anti-Sikh riots that occurred after Indira Gandhi was assassinated. Akhilesh Pillalamarri has a thoughtful piece.