Nightcap

  1. All ideologies eventually seem to fail Scott Sumner, EconLog
  2. State capacity libertarianism as a pipe dream Jason Brennan, 200-Proof Liberals
  3. China after Covid Wang Xiuying, London Review of Books
  4. Nationalism, Eastern European style James Felak, Law & Liberty

Nightcap

  1. The American Dream after Covid-19 Paul Croce, Origins
  2. Marx has the last laugh Eric Lonergan, Philosophy of Money
  3. Some thoughts on “state capacity” Mark Koyama, NOL
  4. British socialism and the European Union Helen Dale, Law & Liberty

“Polycentric Sovereignty: The Medieval Constitution, Governance Quality, and the Wealth of Nations”

It is widely accepted that good institutions caused the massive increase in living standards enjoyed by ordinary people over the past two hundred years. But what caused good institutions? Scholars once pointed to the polycentric governance structures of medieval Europe, but this explanation has been replaced by arguments favoring state capacity. Here we revitalize the ‘polycentric Europe’ hypothesis and argue it is a complement to state capacity explanations. We develop a new institutional theory, based on political property rights and what we call polycentric sovereignty, which explains how the medieval patrimony resulted in the requisite background conditions for good governance, and hence widespread social wealth creation.

By Alexander Salter & Andrew Young. Read the whole excellent thing here. I wonder how much the author’s conception of “polycentric sovereignty” has in common with Madison’s compound republic?

Salter & Young do a great job bringing decentralization back into the overall “economic growth and political freedom” picture. Over the past two decades, political centralization as a good thing has been making a comeback under the guise of “state capacity.” This isn’t a bad trend, but it has left several large gaps in understanding how economic development and political freedom works. (For example, how to prevent centralized states from pursuing illiberal ends, or using illiberal means to pursue supposedly liberal ends.)

This article brings decentralization back into the picture, using Elinor and Vincent Ostrom’s conception of polycentricity as a model. However, I don’t think they spend enough time on Vincent Ostrom’s understanding of the American compound republic. The American federalists were concerned with exactly the same thing that we are concerned about now: how to maintain a proper balance of centralized power and decentralized power so that liberty may flourish. I’ve emphasized the important part with italics. The liberty aspect gets de-emphasized to make room for the sexier “economic growth” aspect, but political freedom is still paramount when it comes to thinking through matters of politics.

The American federalists, and especially Madison, came up with the compound republic to address the centralized/decentralized debate. Scholars continue to underrate its genius and usefulness for capturing humans as they are. Ostrom’s book on the Madisonian compound republic is worth your time and money. Read it in tandem with this book on the Federalist Papers and this book on the formation of the American republic and this short paper on the continued viability of the compound republic to today’s world. Once you’ve done the readings, start writing (or better yet: blogging!).

Nightcap

  1. On broken treaties with the Natives Anderson & Crepelle, the Hill
  2. The EU’s last shot at redemption? Austin Doehler, War on the Rocks
  3. The flailing states of Britain and the US Pankaj Mishra, LRB
  4. Political freedom’s revelatory effect Matthew Crawford, Hedgehog Review

Nightcap

  1. The perils of sacrificing sovereignty to gain sovereignty Michael Koplow, Ottomans & Zionists
  2. State capacity libertarianism and the Chinese model Scott Sumner, MoneyIllusion
  3. A thought experiment in distributed government Rick Weber, Notes On Liberty
  4. Trapped in Iran Nicolas Pelham, 1843

Nightcap

  1. We’re still living in Stalin’s world Diana Preston, New York Times
  2. The state is a predator, not a tool Joseph Salerno, Mises Wire
  3. The world is increasingly fragile Scott Sumner, MoneyIllusion
  4. Facts about Gustav Klimt Zoë Vanderweide, Sotheby’s

Nightcap

  1. Michel Houellebecq’s fragile world Siddhartha Deb, New Republic
  2. Classical liberalism vs libertarianism John McGinnis, Law & Liberty
  3. State capacity libertarianism is just old fashioned conservatism Samuel Hammond, Niskanen
  4. Meritocracy and capitalism in China today Long Ling, LRB

Nightcap

  1. A classical liberal view of the Iran crisis? Van de Haar & Kamall, IEA
  2. Great essay on state capacity libertarianism Geloso & Salter, AEIR
  3. The loneliness of the resistance protester Micah Sifry, New Republic
  4. The Woke primary is over and everybody lost Matt Welch, Reason

Nightcap

  1. Becoming “white”: the much-maligned notion of assimilation Peter Skerry, CRB
  2. Kama muta: a new term for that warm, fuzzy feeling we all get Alan Fiske, Aeon
  3. Moral blackmail and salvation by faith (Iran) Irfan Khawaja, Policy of Truth
  4. Should libertarians heart state capacity? Arnold Kling, askblog

Nightcap

  1. Humour in the time of Stalin Jonathan Waterlow, Aeon
  2. Liberalism and the death penalty Craig Lerner, Law & Liberty
  3. American Jews and antisemitism Michael Koplow, Ottomans & Zionists
  4. State capacity libertarianism Tyler Cowen, Marginal Revolution

Nightcap

  1. Wars makes us safer and richer Ian Morris, Washington Post
  2. Sovereignty is no solution Dalibor Rohac, American Interest
  3. American conservatism and Marxist paradigms Mary Lucia Darst, NOL
  4. Libertarians and the legitimacy crisis Arnold Kling, askblog

Nightcap

  1. Trump’s “Salute to America” is a salute to government employees Ryan McMaken, Power & Market
  2. Oligarchs and oligarchs Branko Milanovic, globalinequality
  3. The deleted clause of the Declaration of Independence Kevin Kallmes, NOL
  4. Class and optimism Chris Dillow, Stumbling & Mumbling

Afternoon Tea: “Independent Indians and the U.S.-Mexican War”

This cross-border conversation had a broad and tragic context. In the early 1830s, following what for most had been nearly two generations of imperfect peace, Comanches, Kiowas, Navajos, and several different tribes of Apaches dramatically increased their attacks upon northern Mexican settlements. While contexts and motivations varied widely, most of the escalating violence reflected Mexico’s declining military and diplomatic capabilities, as well as burgeoning markets for stolen livestock and captives. Indian men raided Mexican ranches, haciendas, and towns, killing or capturing the people they found there, and stealing or destroying animals and other property. When able, Mexicans responded by attacking their enemies with comparable cruelty and avarice. Raids expanded, breeding reprisals and deepening enmities, until the searing violence touched all or parts of nine states.

This is from Brian DeLay, a historian at Cal-Berkeley. Here is a link.

Nightcap

  1. Britain’s Open Doors Policy Chris Dillow, Stumbling and Mumbling
  2. About those Ancestry dot com commercials… Ryan Anderson, Anthro{dendum}
  3. The Unfinished World Nick Nielsen, The View from Oregon
  4. “State Capacity” is Sleight of Hand Bryan Caplan, EconLog

Revisiting Epstein’s Freedom and Growth


I was fortunate to be invited give the Epstein Lecture at LSE this March. The series is named after the great LSE economic historian Larry (Stephen) Epstein. Here I’ll summarize why it was such an honor to give the lectures. The content of the lecture will be another post.

Epstein was a historian whose origin field of expertise was medieval Italy. I encountered him through Freedom and Growth. Published in 2000, I first read it a couple of years later, perhaps in 2002 or 2003. At the time I was devoted to a story of economic growth shaped by Douglass North, particularly Structure and Change in Economic History (1981).

The focus of Structure and Change was on transaction costs. High transaction costs limited market exchange and kept societies poor for most of history. Sustained economic growth could only occur once transaction costs fell to a level that allowed markets to expand and the division of labor to develop. On this view, market expansion or Smithian growth was itself a stimulus to technological innovation. But what kept transaction costs high?

One answer North gave was the state. To paraphrase: the state had the ability to both keep a society mired in poverty through predatory behavior and to provide the preconditions for growth by securing property rights. The origins of sustained economic growth for North lay in institutional changes that occurred secured property rights and lowered transaction costs. The most important such institutional change was the Glorious Revolution of 1688.


North’s account received many challenges, but the issue that Epstein honed in on was the assumption that there was such a state, able to either revoke or secure property rights. It was assumed that “rulers rule”. Epstein contested this arguing that New Institutional Economists

“project backwards in time a form of centralised sovereignty and jurisdictional integration that was first achieved in Continental Europe during the nineteenth century; they therefore fundamentally misrepresent the character of pre-modern states.”

North, Wallis, and Weingast would address this in their 2009 Violence and Social Orders. But Epstein’s criticism was spot on in 2000. Epstein argued that alongside the problem of predatory states, a central problem was the lack of integrated markets. He attributed market disintegration to coordination and prisoners’ dilemma problems between political authorities. In so doing, Epstein set the agenda for the subsequent “state capacity” research agenda.

Epstein made several points which continued to be expanded upon by current research (see here). First, he documented that the lower interest rates that the British state paid after 1688 were characteristic of city republics from the middle ages onwards. He argued that the English monarchy in the 17th century was characterized by an anomalously backwards financial system. Lower interest rates after 1688 partly represent a convergence to the Republican norm achieved by Italian city-states centuries earlier.

Second, he challenged the argument that monarchies “overtaxed” cities. There was “no evidence that townspeople paid higher taxes under monarchies than republics”. Per capita taxes were likely higher in Republican city-states.

Third, he disputed that Republican city-states like Florence brought economic freedom noting that “republican subjects faced several limitations to their economic and political freedoms that monarchical subjects did not”. All of this challenged generalizations made by historical sociologists like Charles Tilly and economic historians like North.


Epstein’s historical evidence came from medieval Italy. Late medieval Italy was highly urbanized and prosperous by pre-industrial standards. According to Broadberry’s estimates, per capita GDP in Italy in 1450 was not matched by England until 1750. Like growth elsewhere in the premodern world, it was Smithian growth, driven by trade, market integration, and the division of labor. But unlike in England, this Smithian growth did not continue and blossom into modern growth. Epstein’s explanation for why this did not take place was that late medieval Italy suffered an “integration crisis”.

He saw the late medieval period as characterized by new opportunities for growth and innovation. Urbanization increased. Capital markets expanded and deepened. Interregional trade developed. Proto-industrialization took place. But Epstein contended these opportunities were only seized in areas where political authority was centralization.

In reference to proto-industrialization, he observed that

“Crucially, the success of regional crafts was inversely proportional to the concentration of economic and institutional power in the hands of a dominant city.”

With respect to the establishment of permanent fairs, he noted that

In fifteenth-century Lombardy, new fairs proliferated only after the balance of power shifted decisively from the former city-states to the territorial prince with Francesco Sforza’s victory in 1447.

Market integration was complemented and perhaps driven by political integration. Integrated urban hierarchies were themselves the product of political centralization.

“Centralisation underlies all the major institutional changes to market structures previously described. It lowered domestic transport costs, made it easier to enforce contracts and to match demand and supply, intensified economic competition between towns and strengthened urban hierarchies, weakened urban monopolies over the countryside, and stimulated labour mobility and technological diffusion.”

The more centralized parts of Italy — notably Lombardy — were better able to benefit from these trends than was Tuscany. But in general, political fragmentation and regional diversity were “distinctive features of pre-modern Italy” in general and an impediment to its long-run growth prospects.

Unlike in his analysis of interest rates, Epstein brought little data to bear on these claims and I am unaware of subsequent research on late medieval Italy. As such, the thesis of a late medieval integration crisis laid out in Freedom and Growth remains speculative. Epstein would no doubt have fill in the details had he lived longer. Subsequent research has mostly focused on early modern rather than medieval Europe (see here).  But the larger message: the importance of the state for premodern economic development has been central to subsequent research, including my own work (e.g. here).