Douglas North, John Wallis, and Barry Weingast believe that economists do not properly include controlling violence in models that explain economic growth. Barry Weingast explains their theory on the EconTalk podcast, “Weingast on Violence, Power and a Theory of Nearly Everything.”
They divide countries into three types of societies or orders. The first is the hunter-gatherer or primitive order. It has very little specialization, an engine of economic growth, and a great deal of violence. Primitive orders are poor, producing less than $400 per capita GDP.
The next order is the limited access order and it solves the problem of violence by trading economic favors to specialists in violence for foregoing violence. The size of the payoff is directly related to the ability of commit violence. The government creates monopoly rents and uses the power of the state to quell competition. Per capital GDP in these orders ranges between $400 and $8,000. The limited access order is similar to Hernando DeSoto’s mercantilist society. North, Wallis and Weingast include countries as diverse as Bolivia, India and Russia as limited access orders.
The final order is the open access order. Economic competition is over price and quality, not violence. In an open access order, Schumpeterian competition through creative destruction permits new groups to spontaneously form to exploit new ideas, products and organizational forms. Open access orders are maintained by open access to a plethora of organizations including economic, political, social and religious. Normative beliefs in these societies promote the inclusion of new groups, and equality before the law. Constitutions that limit government power are also important. Open access societies begin at $8,000 per capita GDP, and goes up from there. In fact, the average per capita GDP exceeds $20,000.
Why don’t the limited access orders reform, adopting rules that will make them more like open access orders? Attempts to reform invite violence from previously favored groups that might be losing privilege. Reform would bring greater wealth over time if violence was avoided. But avoidance is not a given. The government might attempt to buy out the privileged, but this is also a difficult policy to implement. Can you promise the privileged a bigger payoff than they already realize? Furthermore, other groups may demand reform without payoffs, escalating the probability of violence.
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1 year ago
These are sad situation violence in the economic growth making deals with others countries are causing more problems. These trading in economic favors are going to continue with problems making matters worst.
ReplyDeleteI believe that violence is unavoidable. As human beings it is are nature to fight one another. I agree with the conclusion of this blog we should try to find a happy median by adopting traits from limited and open access orders, and also accepting the fact that violence is part of economic growth.
ReplyDeleteI believe that Economics plays a role in violence. Most people use violence to survive in this world. either for protection or to get necessities such as food. Jobs are part of the Economic circle, so therefore if a person is unemployed and unable to get food they are more likely to use violence.
ReplyDeleteEconimics is part of the reason sorts of violence happen today. UFC is a fighting sport in which men go to hand in hand combat to protect themselves and earn a living. This job is making these men money just like a doctor is, it is just differnt in there job discriptions. All jobs from UFC to being a doctor fit into the circular flow model as a job. Violence is also used to get food and other neccessities for some people. Violence is indeed a part of economic growth, it makes us stroger.
ReplyDeleteI agree that violence is needed for economic growth and strength. It is impossible to get rid of all the violence and is, in fact, probably not such a good idea. We need to find a middle ground where violence and new ideas come together in society. IT is true, you cannot promise anyone a certain payoff, but you can show them the reality that if they lessen violence and encourage new ideas and creativity, their payoff should increase beyond its current level. At the same time, the less privileged are not resorting to violence as a means of support. Int he end, the whole country is better off.
ReplyDeleteWhile completely eradicating violence in any society is impossible, the inverse proportion of true economic competition and violence is intriguing. Honestly, this is a fringe benefit of real capitalism I had never considered. Simply fending off violence with bribery--as in the limited access order--seems a recipe for future destruction, as it is the violent who are, in fact, truly in control. It is only when economic competition is the primary driving force of society that violence becomes, in a sense, ancillary and almost unproductive. A thriving ecomomic system seems a necessary precursor to so many other societal benefits (equality, inclusion, a free marketplace of ideas). And while this system may be most beneficial to the most people, other "access orders" will resist change at every turn. Unfortunately, that is as much in our collective nature as is violence.
ReplyDeleteI believe it is hard to find a medium between a ton of violence and no violence. I believe it would take too much time and money to try to totally get rid of violence. But at the same time, we need figure out a way to reduce violance. I guess I can see how violence can help our economy. Because many jobs are around because there is violence. For instance, the police forces, and other people whose jobs require them to protect our nation. But at the same time, a ton of violence can cause many deaths, which will lower our population, so how can that stimulate the economy? Therefore, i believe that we should find a happy medium to better support our economy.
ReplyDeletei agree that sometimes violence is necessary, and that its part of human nature. sometimes its unavoidale, just like some things that happen in the economy are unavoidable
ReplyDeleteI agree that finding a adequate middle ground is necessary for keeping a strong economy. Bribery is not the proper way to eliminate violence. Violence needs to be taken care of the proper way. For example, criminals start violence and the men and women in uniform are the ones in charge of stopping them. Violence creates occupational opportunities that are needed on a daily basis. There for, violence is most definitely a part of this economy and will always be.
ReplyDeleteWhile getting rid of all violence in the world is impossible, I think we should try to find a happy median. Violence can negatively affect society but on the other hand it has created jobs. Because stopping all violence is clearly impossible, if we could reduce it at all it would help the struggling economy. Crimes and violence worsen in diffucult times like now and we should definately try to hinder it.
ReplyDeleteI agree that violence does affect the overall economy and I agree with the conclusion of this blog. Violence is unavoidable, however we should be able to propose a plan to reduce violence, but not using bribery as described by the limited access order. I feel we should strive to reach a happy median between the "limited" & "open" access orders to improve the economy.
ReplyDeleteThere will never be a happy medium.....violence will always be around us no matter how hard we, Americans, work at negotioations with one another or with other countries.
ReplyDeleteAgree! Violence is necessary at certain times, not all the time. But to some people violence can become second nature, not so agreed. Violence is the bad part of our everyday human lives. Most of the time, violence is not necessary and one shouldn’t take a part in it, though some people still do, knowing it’s the wrong thing to do. As Violence is not always necessary, some things that occur in the Economy are also not always necessary.
ReplyDeleteThis posting was very insightful, because I was not aware of the three types of orders. It made me evaluate economics in a different way that makes sense. Of the three orders, I think the open access order is the most beneficial, because the compitition is geared toward price and quality and allows implementation of new ideas. Limited government allows these benefits to occur and GDP appears to be exceeds the other two orders. Why would anyone want to emplement rules from the limited access order that promotes bribery, violence and produces relatively low GDP? Violence will always be a part of human existence, however, in my opinion a happy medium serves it's purpose much better than greather wealth over time.
ReplyDeleteI think paying off someone, another country, or a group (like pirates) not commitment violence is a bad economic policy, if you are able to stand up for yourself. I think paying out a bribe to avoid aggression by one society on another should only be done till your society can fend for its self (would you have any other choice if means survival). You can look to history as to see what has happened when societies pay a bribe or tribute to avoid invasion or violence. The Western Roman Empire paid off the Huns to avoid invasion, only to have to face them eventually in a military confrontation. France in dark ages paid off the Vikings to avoid their marauding raids. This only caused more raids and more Viking incursions. I think if they had resisted (if able) initially they would have caused these societies to find softer targets, after all if you were a robber would you prefer to rob people who might hurt you versus people who will not resist and cooperate. By promoting equity under the law would be the best way to go (counting on you can enforce the law). In under developed society that is the key issue in violence, they have no way to effectively enforce their property rights other than violence. They often can turn to their governments because the government is ineffective to do anything about it or the government is the aggressor. So you are left to fend for yourself to deal with an aggressor that understands only violence or a pay off. A tough place to be if you lack the means to defend yourself.
ReplyDeleteI think paying off someone, another country, or a group (like pirates) not commitment violence is a bad economic policy, if you are able to stand up for yourself. I think paying out a bribe to avoid aggression by one society on another should only be done till your society can fend for its self (would you have any other choice if means survival). You can look to history as to see what has happened when societies pay a bribe or tribute to avoid invasion or violence. The Western Roman Empire paid off the Huns to avoid invasion, only to have to face them eventually in a military confrontation. France in dark ages paid off the Vikings to avoid their marauding raids. This only caused more raids and more Viking incursions. I think if they had resisted (if able) initially they would have caused these societies to find softer targets, after all if you were a robber would you prefer to rob people who might hurt you versus people who will not resist and cooperate. By promoting equity under the law would be the best way to go (counting on you can enforce the law). In under developed society that is the key issue in violence, they have no way to effectively enforce their property rights other than violence. They often can turn to their governments because the government is ineffective to do anything about it or the government is the aggressor. So you are left to fend for yourself to deal with an aggressor that understands only violence or a pay off. A tough place to be if you lack the means to defend yourself.
ReplyDeleteI do have to agree with patricia, me reading this made me realize alot of stuff that I never paid attention to and the one that i choose is the best would have to be The Open Access Order because it does have a higher GDP, and has to speak about quality and price, that is why I have to say that this is the best orders.
ReplyDeleteViolence is inevitable throughout the entire world. It is how it is and nobody can change it. However, the poor are more likely to result to violence to get the things they need to survive than those that have more and already have their needs met. This is simply human nature and it cannot be changed. Desperate times call for desperate measures and even those that would have normally remained calm, can result to violence to feed their families. That being said, I also don't feel that bribery is the way to go either. I also feel there must be a way to reform the limited access orders, to create a non-violent, non-bribing order. Where there is a will, I believe there is a way.
ReplyDeleteI believe there is never going to be a day without some sort of violence somewhere. It is human nature almost. It is something that will never go away, but it would be easier if the violence was reduced. It would help with economic growth, although you have to do it honestly and not with bribery because then that could cause more violence.
ReplyDeleteIt is impossible and fool hardy to try to eradicate all violence. Violence is too deeply ingrained in the human psyche. Because of this, violence has been exploited to turn a profit through things like sports and violent video games. Violence has become a vital part of economic growth.
ReplyDeletePeople that are feeling like they are lossing something especially any kind of political party never seem to let it happen with out their way of espressing in themselves. Through out history we have seen this even in our own country when we decide to break ties with the the british and become our own sovereignty. The act of violince was all through the revoutionary war... Which this is sad becuase if we as people could see past our own ambitions them maybe there could be greater economic growth in countries that are doing as we did some 300 years ago....
ReplyDeleteAs history recalls, there have always been hunters and gatherers, and it still hasnt changed to this day. The demand for different labors in some countries are different than others. There isn't a need for a forty story building in the middle of a South African desert, there just simply isn't a need for it. The reason for the three different areas are simply for the fact of things are not needed in some countries but needed in others.
ReplyDeleteAll societies have in some way evolved to where they are today. Europe's prosperity was at one time or another a hunter and gather socitey. The deal with implementing these new regulations would be not the changes made, but how the people and land would adjust to the changes. And even though violence may not be a problem, competition will always be in place in top markets. If the people were desperate enough, even in top markets, they could resort to violence without anyone knowing about it.
ReplyDeleteThe bigger the society, the harder it is to control but it is possible. Among the 3 societies the second one, limited access order, has the most chance of making it better through the passage of time. If violence is inevitable, maybe in time the people can live with it. Have to give up something to get something, like tradeoff.
ReplyDeleteThe post describes three different orders being primitive, limited access, and open access. When I read all three I felt as if one economy was being explained. I understand all three are different and are found separately in places, but aren't all three orders found in a single countries economy. Doesn't a country with an impoverished region contain an area with primitive order? When a part of the population uses violence for gain it is considered to be within the limited access order. And finally when the economy functions as a whole setting aside violence it enters into the open access order. But when the economy moves through the orders it doesn't simply forget its past. Parts of the country remain in the past orders. In my opinion all three orders are found in every country's economy. I may be misunderstanding the blog post but its my opinion. Violence, however is a part of economic growth. Take the United States for example. Through its economic growth and progression through the economic orders it had to use violence to get there. Once the violence, in terms of war and revolution, was no longer needed it was set a side but still a factor contributing to growth.
ReplyDeleteQuite honestly as hard as it is to say it Violence is always going to be in existence. I do believe that violence and economics have a relationship. I previously lived in the northwest Indiana area called Gary, Indiana. We moved from the area because unfortunately the unemployment is very high. Also the level of crime rate always seems to raise when unemployment rises. Unfortunately we all switch to survival mode when things get tough and some people resort to the wrong thing in order to survive.
ReplyDeleteI believe that this outlook is very true indeed. It is very difficult for many of the poorer countries in the world to grow economically because of their violence. Like Mexico for example, is a developing country that has trouble growing economically because many of its inhabitants seek money, and an easy way to gain money in Mexico is through violence. With the violence escalating it makes it very difficult for their economy to grow.
ReplyDeleteEveryday you're going to come across violence. It's something you can't really change. When times get rough people can do crazy things. Violence and trying to payoff someone is not the solution,we need to find a middle ground.
ReplyDeleteWith many people left jobless, they need to find a way to pay the bills. This article proves that some people will do anything for money.
ReplyDeleteJordan Kelley said...
ReplyDeleteViolence makes good movies a lot of the time. Actually most good movies have some sort of violence in them and with those movie a lot of people are making money. Violence can make some money and that makes people happy when they have money
Alot of people use violence as a means to support their family. But violence is not the answer, violence has been around for centuries and will be around for centuries more
ReplyDeleteI totally agree with the majority of posts here, in that violence is unavoidable and it will always be around. Violence wither justified or not has kept humans alive since the dawn of time, and will never cease to exist. I also agree with the statements made about violence helping economic growth. In order to make it to the top, you need to be ruthless. As a country that is. Sure, it would be great to find a happy median in which everyone is well taken care of and lives care free...but let's face it, our world will probably never be like that therefore it just isn't realistic.
ReplyDeleteI think that violence is necessary as a last resort. It is hard to compromise between countries because of language, greed and power. Ultimately, every country would do whatever it takes to obtain what they want.
ReplyDeleteEven a limited government scenario, violence is always a possibility and can occur from time to time if parts of that society feels like something is being taken away from them. While violence has not happened yet, the situation in Wisconsin could decline further where violence could occur. Already the political debate has collapsed, with out of state protestors on both sides of the issue being bussed in to protest in the capital itself. Democratic senators have left the state to avoid a vote on limiting collective bargaining. With inflamatory remarks and actions taking place, one wonders how much longer before violence does occur.
ReplyDeleteKen Haltom
Violence happens anywhere it is something that can or cannot be avoided. I agree with the last paragraph. That if violence is avoided it can bring greater wealth.
ReplyDeleteI don't think violence is ever the answer. Granted, violence is unavoidable, it should not be the first way we handle things. Violence may be the easiest way, but it is never the only way to get results.
ReplyDeleteThere is a reason the adage exists "violence is never the answer". The knowledge that violence exists in an equation to greater economics is basically telling me that there is a poor genetic pool making these decisions to utilize violence. Everyone in favor of that should be replaced. As a previous boxer I still don't believe in violence as an answer.
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